Initiating Coverage Agrochemical Sector

INSTITUTIONAL EQUITY RESEARCH
Agrochemicals
From headwinds to harvest: India’s rise as a powerhouse
18 March 2024
INDIA | AGROCHEMICALS | SECTOR UPDATE
Agrochemicals are chemicals used in agriculture, including chemical fertilizers and
pesticides (herbicides, fungicides and insecticides). In FY24, the agrochemical industry faced
Companies
headwinds such as build-up of high-cost inventory, declining input prices, and higher China Company Rating CMP (Rs) TP (Rs)
supplies, majorly in exports, and to a small amount in domestic markets. While these DAGRI IN Buy 977 1,187
headwinds will continue to blow for some time, there are signs of a turnaround and return RALI IN Neutral 256 270
of order, including volume offtake in technicals, increase in global agri commodity prices, BYRCS IN Neutral 5,086 5,435
and maximum liquidation of high cost inventory, which have provided relief and optimism Source: Company, PhillipCapital India Research
to manufacturers for better performance in FY25. In this report, we focus on crop-protection

molecules (natural and chemical) and their importance to the agricultural ecosystem and
the opportunity for Indian agrochemicals manufacturers. Harmish Desai, Research Analyst
• Global agchem industry CAGR at 4.2% over 2024-32: The global crop protection market [email protected]
is expected to reach US$ 135bn by 2032. Herbicides account for the largest share of the
market, followed by fungicides and insecticides.
• India to emerge as a robust, far-reaching player: The Indian agrochemicals sector has
built state-of-the-art production facilities to meet both local and international demand,
aiming for a sustained decrease in agrochemical imports. The sector has become well-
known throughout the world for its economical production methods, high-quality
products, and affordable prices. The Indian government’s policy reforms, prioritizing R&D
backed innovation, and manufacturing initiatives under the Make in India mission, are
providing impetus for the sector to develop and help India become a global
manufacturing hub. India is already the world's 2nd largest agrochemical exporter, the
fourth-largest producer in global crop-protection, and its domestic market should see
6.0-6.5% CAGR by 2027-28. The sector’s growth is fuelled by a shift towards domestic
innovation and manufacturing of post-patent products at competitive prices.
Partnerships with international players for R&D and distribution are also a key driver.
• Opportunities for India: Off-patent molecules offer lower costs and wider access. Despite
challenges like limited uptake, India's low per-hectare agrochemical consumption and
vast arable land present avenues for growth. Additionally, bio-pesticides and drone
technology further enhance agricultural efficiency and productivity.
• China’s agrochemicals industry is slowly gaining strength: China's agrochemicals
industry faces challenges but is adapting. Production is down but exports are rising,
driven by herbicides. Companies are investing in new capacity; stricter regulations are
limiting new registrations.
• Challenges: Agrochemical industry faces challenges from regulations, pest-resistant GM
crops, health impacts, spurious products, and inventory pileups due to Chinese exports.
The industry also faces challenges related to uncertain monsoons and changes in the laws
related to banning of agrochemicals in India and other countries.
Indian manufacturers are aligning their manufacturing activities to global standards – which
will help them. Some of the changes they are implementing are:
1. Apart from their generic portfolio, they are increasing R&D expenditure to develop and
commercialize new products.
2. In an effort to reduce reliance on imports, more businesses are constructing or
purchasing plants to produce their own raw materials and intermediates.
3. Creating a robust and effective distribution network to become more accessible.
4. Tracking the flow of products through their supply chain network via digital tools.
Manufacturers have seen significant portfolio optimization and consolidation through
M&A in the last few years mostly to expand the geographical footprint of the acquiring
companies, in addition to expanding their current product offerings.
5. Exploring opportunities in biologicals as farmers explore bio-pesticides.
6. Many manufacturers are understanding the importance of international collaborations
for introduction of new age molecules to the market.
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AGROCHEMICALS SECTOR UPDATE
Table of Contents
Executive summary............................................................................................ 3
Global agchem industry CAGR at 4.2% over 2024-32 ....................................... 5
India agchem manufacturers to prop global demand ....................................... 7
Investments in agrochemicals to support growing demand ......................... 9
Opportunities for India in agrochemicals ........................................................ 11
#1: Off patent molecules: Unlocking new vistas ......................................... 11
#2: Agrochemical consumption per hectare is very low in India ................ 11
#3: India has a vast arable land, which boosts agrochemical potential ...... 12
#5: Bio-pesticides – the future of the agrochemicals industry.................... 14
#6: Drones to empower farmers in agricultural operations........................ 17
China’s agrochem industry: Slowly gaining strength....................................... 19
Agriculture in GDP ........................................................................................... 23
Challenges in the agrochemical industry ......................................................... 26
Appendix .......................................................................................................... 28
I. Pesticides ban ........................................................................................... 28
II. Registrations processes in India .............................................................. 30
COMPANIES SECTION
Dhanuka Agritech Ltd ..................................................................................... 33

Rallis India Ltd ................................................................................................. 42
Bayer CropScience Ltd .................................................................................... 51

Executive summary
India solidifies its position as a major exporter of agrochemicals
Agrochemicals encompass a range of chemicals used in agriculture, including fertilizers
and pesticides. They play a crucial role in increasing crop yields, reducing losses due to
pests and diseases, enhancing food security, and promoting cost-efficient farming
practices. India is emerging as a significant player in the global agrochemicals industry
(13-15% market share), with state-of-the-art production facilities and policy reforms
supporting its growth. We expect India's agrochemical market to grow steadily,
supported by increased exports and domestic usage.
Agrochemicals landscape India/international

• The global agrochemicals industry will see a CAGR of c.4.2% over 2024 to 2032
touching c.US$ 135bn, fuelled by synthetic and biological solutions. Herbicides will
maintain dominance in the global market, with South America remaining a key
consumer region.
• India: India's agrochemicals market CAGR is likely to be higher (than global) at 6.0-
6.5% by 2027-28 (touching US$ 9.8bn), driven by both exports and domestic
consumption. India has emerged as the second-largest exporter of agrochemicals
globally, surpassing the USA. The country has a trade surplus in the agrochemical
sector, with exports primarily to the USA and Brazil; it will soon surpass USA and
Brazil in global exports volume. Indian manufacturers will increase their
investments in R&D to develop innovative products and improve competitiveness.
Backward integration will become more common, to ensure supply-chain stability
and cost efficiency. Regulatory reforms will lead to a more streamlined and
transparent process for agrochemical registrations. Joint ventures between Indian
and international companies will become more prevalent, fostering technology
transfer and market expansion. Continued focus on sustainability and
environmental concerns will drive innovation in the agrochemical industry, leading
to the development of more eco-friendly products and practices.
• China has faced challenges such as overcapacity and low prices, impacting
profitability. However, the country remains a major exporter of agrochemical
products.
Off-patent molecules drive affordable crop protection

• Off-patent molecules will play a significant role in meeting increasing demand for
agrochemicals. These molecules present a sizeable opportunity, constituting 75%
of the global market.
• Despite the vast opportunity, only 30-40% of off-patent active ingredients are
utilized by generic manufacturers due to various challenges. Lower costs,
increased availability, improved safety, and new research opportunities are some
benefits associated with off-patent molecules.
• Fungicides and insecticides are preferred over herbicides among off-patent
molecules.
• Regulatory hurdles, such as patented processes, can hinder generic
manufacturers, although they often find alternative methods to develop the same
molecule.
Opportunities for India: Growth via exports, innovation and biopesticides

• India can further capitalize on its position as a major exporter of agrochemicals by
expanding into new markets and enhancing competitiveness through innovation
and quality improvement.
• Indian manufacturers will focus on overcoming challenges associated with off-
patent molecules to capture a larger share of the global market. In this, joint
ventures with international companies are facilitating technology transfer and
enhancing distribution networks for Indian agrochemical firms.
• India's agrochemical market is poised for expansion, driven by factors such as
increasing population, rising pest attacks, and government initiatives.

• The country’s substantial arable land area, coupled with its low per hectare
application of agrochemicals presents a big opportunity for domestic
manufacturers.
• Adoption of technologies like drones and precision agriculture presents
possibilities for improving efficiency, reducing input costs, and enhancing crop
management practices. Expectations of a quadruple expansion of the Indian
agriculture drones market by 2028, indicate significant growth opportunities,
driven by the efficiency and effectiveness of drones in various agricultural
applications such as soil analysis, crop monitoring, and spraying and health and
safety features.
• With increasing awareness of environmental sustainability, there is a growing
demand for bio-pesticides, offering Indian manufacturers the chance to develop
and market eco-friendly solutions. The bio-pesticides market is likely to see a CAGR
of 14%, driven by factors such as increasing awareness of environmental
sustainability and the demand for safer pest control methods.
Challenges amid growth potential: Competition, regulations, fluctuating prices, and

weather patterns
• India faces challenges in penetrating rural markets due to factors like lack of
awareness, distribution challenges, and affordability issues. India's low per hectare
application of agrochemicals indicates underutilization and highlights the need for
increased awareness and adoption among farmers. Despite domestic production
capabilities, India still relies on imports for certain agrochemical products,
exposing the industry to supply chain risks and foreign exchange fluctuations.
Competition from imported agrochemicals, particularly from China, poses a threat
to domestic manufacturers, impacting market share and profitability.
• Regulations (both local and international), state-level bans, and international
restrictions pose challenges, affecting product availability and sales. Increasing
environmental awareness and concerns about the ecological impact of
agrochemicals may lead to stricter regulations and consumer preferences for eco-
friendly alternatives.
• The use of glyphosate and other controversial pesticides will face increasing
scrutiny and regulation worldwide, leading to shifts in farming practices.
• Climate patterns, such as El Niño and La Niña, will continue to influence
agricultural production, leading to variations in demand for agrochemicals and
other farming inputs.
• Fluctuations in raw material prices, particularly for petrochemical-based inputs,
pose a threat to profitability.
Companies Section:
Dhanuka Agritech: We believe DAGRI can be well placed to benefit from a return to
normalcy in agrochemicals, given its strong product portfolio, new launches every year
and solid distribution network that will help it to reach newer markets. We initiate
coverage on DAGRI with a Buy rating and a target of Rs 1,187, 21x FY26 EPS.
Rallis India: RALI has been working on a new launches to reduce dependence on
products such as pendimethalin, metribuzin, etc., in an effort to increase crop-care
margins. We initiate coverage with a Neutral rating and a target of Rs 270 (17x FY26
EPS), as we await signs of: (1) volume/price recovery in generics, and (2) comfortable
valuation.
Bayer Cropscience: BYRCS has a vast crop-protection portfolio comprising innovative

chemicals and biological pest-management solutions. We remain optimistic on the
long-term prospects of the company, however, near term scenario presents few
challenges. We initiate coverage with a Neutral rating at a target of Rs 5,435, 23x FY26
EPS.

Global agchem industry CAGR at 4.2% over 2024-32

The global crop-protection products market (both synthetic and biological solutions)
grew at a significant c.16% in 2023, reaching a value of c.US$ 92.2bn. The IMARC Group
expects this market to touch c.US$ 135bn by 2032, which indicates a 4.2% CAGR over
2024-32. In 2023, herbicides constituted a majority c.47% of crop-sector products,
followed by fungicides and insecticides at c.25% each. The main reasons herbicides are
so big is the need to manage weeds, which compete with crops for resources like
sunshine, water, and nutrients. Biological crop protection products (despite rapid
growth) still makes up for less than 5% of the total market, thus remaining a specialised
segment.
Note: Numbers derived from FY23 annual report of listed agrochemical players.
In 2022, the global crop-protection sector witnessed a number of extraordinary events

– both positive and negative – that disrupted most regional markets. These included:
• More favourable weather conditions in several regions, most notably Australia and
several south Asian countries
• Post-covid, there was decent demand pick up, which aided agrochemicals
production in India. Also, international players began to prefer India over China for
sourcing agrochemicals.
• The fact that China exerts extraordinary control on global product supply and
pricing became strikingly apparent in late 2020-21 and early 2022 when significant
shutdowns in China’s agrochemicals industry led to substantial spikes in prices.
Crop protection market 2016-2022

2016 2017 2018 2019 2020 2021 2022 Despite a blip in 2019, the trend points
to continuous growth in crop protection
World Crop Protection Market (US$ million) 61,628 63,489 67,251 66,702 68,407 71,604 78,715
solutions, signalling resilience and
- Of which biocontrol products 2,317 2,420 2,585 2,788 3,040 3,344 3,562 stable demand
Nominal change on previous year (%) 6.0 3.0 5.9 -0.8 2.6 4.7 9.9
Source: UPL FY23 Annual Report
Crop-wise growth of agrochemical market: Soybeans and cotton fastest growing

Crop-wise growth of agrochemical market Growth
Soybeans 18.0%
Cotton 16.7%
Cereals 13.9%
Corn 13.8%
Rice 3.8%
Fruits and vegetables 2.9%
Category-wise growth in global markets: Herbicides lead in share and growth

Category-wise growth in global markets (US$) Share of global market YoY growth rate
Herbicide 46.0% c.14%
Insecticide 26.0% c.6-7%
Fungicide 25.0% c.7-8%
Others (Includes PGRs, fumigants and pheromones) 3.0% c.2-3%

Some of the benefits of agrochemicals are:

• Increase in crop yields: Agrochemicals help farmers by preventing weeds from
growing around crops and lowering pest assault on standing crops, thus increasing
overall production and yield.
• Increase in farm income: Farm revenues are projected to rise in the event that
marketable yields and quality continue to improve. Increase in farm income leads
to higher spending power, which in turn benefits the economy.
• Cost efficient farming: Use of agrochemicals increase overall efficiency of farming
operations.
• Reduction in deforestation: By enabling farmers to cultivate more crops in a given
area with less tillage, they may mitigate soil erosion, reduce deforestation, and
conserve natural resources
Herbicide market trends: Glyphosate, glufosinate, South America dominate

In the global crop protection market, the herbicides segment has been growing faster
than insecticides and fungicides, mainly driven by better pricing; in herbicides,
glyphosate and glufosinate are some prominent products. However, glyphospate is Herbicide use is booming in South
facing scrutiny worldwide with restrictions and bans being implemented by several America; the global market for
countries. The herbicide market was US$ 32bn in 2022, and is projected to grow to US$ herbicides is likely to touch US$ 53bn by
53bn by 2032, which implies a compound annual growth rate of 6%. South America has 2032 while the total market for crop-
the highest regional share of the herbicide market at 43%, with Argentina, Brazil, and protection touches c.US$ 135bn
Chile being the largest consumers. The global average per hectare consumption
increased to 2.6 kg/ha in 2022 from 1.8 kg/ha in 2017.
Insecticide market dynamics: Patent expirations, pest attacks cause significant losses
This category has seen a recent increase in demand due to more insect attacks and
expansion of area under agriculture in Brazil. Also, chlorantraniliprole (CTPR, which Rising demand for insecticides driven by
controls caterpillars) lately went off patent in a few geographies. The global average increased pest pressures and patent
consumption of insecticides, at c.919g per hectare, is rising due to increasing pest expirations
populations and the need for higher yield productivity. The Food and Agriculture
Organization (FAO) estimates that 40% of global crop production is lost to pests
annually, which corresponds to a loss of c.US$ 70-80bn.
Fungicides: US, Europe, Asia big markets; rising attacks spur higher consumption
Fungicides have a strong presence in the US, Europe, and Asian markets. Fungal
attacks, a threat to crop productivity, affect a wide range of crops – which has led to
an increase in average per-hectare consumption of these products to 1.6 kg/ ha in 2022
from 1.4 kg/ ha in 2017.
Agrochemicals consumption/hectare
Herbicide Insecticide Fungicide
60
50
40
'000 grams
30
20
10
0
2017 2018 2019 2020 2021 2022
Source: PhillipCapital India Research

India agchem manufacturers to prop global demand

With a 13-15% share, India is the fourth-largest producer in the global crop-protection
market. In FY23, the Indian market size was estimated at c.Rs 765bn with insecticides
accounting for a major 40% share, followed by fungicides at 34% and herbicides at 23%.
The overall market is likely to see a CAGR of around 6.0-6.5% by 2027-28 because of
an increase in exports and domestic usage. After covid, the increase in agrochemicals
exports from India was led by an increase in formulations prices and adoption of the
China+1 strategy.
In FY24, Indian agrochemicals players’ margins have faced headwinds due to the
liquidation of high-cost inventory and pressure on product pricing, which has squeezed
profitability.
SWOT analysis of the Indian agrochemicals industry
STRENGTHS WEAKNESS OPPORTUNITY THREATS
S W O T
1. Low cost manufacturing 1. High R&D expenditure 1. Focus on innovative 1. Integrated pest
2. Availability of process 2. Dependence on monsoon farming solutions management (IPM) and
technologies 3. Consumption imbalance 2. Patent expiry rising demand for organic
3. Ample capacity 4. Capital intensive 3. Export potential farming
5. Registration norms 4. Scope for increase in 2. Genetically modified
6. Health hazards usage seeds
5. Rural infrastructure & IT 3. Spurious pesticides
6. Availability of credit
facilities
7. Increase in minimum
support price (MSP)
Source: Company Data, PhillipCapital India Research
Indian agrochemicals industry India: Segment-wise share of agrochemicals in 2023

8 Others, 3%
Herbicide,
7 23%
6
Fungicide,
5 34%
US$ bn
0 Insecticide,
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 40%
Source: PhillipCapital India Research Source: PhillipCapital India Research

India: Top-5 agrochemicals consuming states India: Top-5 agrochemicals manufactured

Uttar Pradesh Maharashtra Mancozeb 2,4-D
Punjab Telangana 140000
14000 Acephate Profenofos
Haryana
120000
12000
100000
10000
80000
8000
MT
MT
6000 60000
4000 40000
2000 20000
0 0
2018-19 2019-20 2020-21 2021-22 2022-23 2018-19 2019-20 2020-21 2021-22 2022-23
India became 2nd largest exporter of agrochemicals globally in 2022

While China leads agrochemicals exports at US$ 11.1bn, according to the World Trade
Organisation (WTO)’s data, India emerged as the second-largest exporter of
agrochemicals globally in 2022 at US$ 5.5bn, surpassing USA’s US$ 5.4bn exports. This
resulted in a trade surplus of Rs 289bn in FY23 in this segment for India. In the same
year, USA and Brazil went on to constitute +50% of India’s agrochemicals exports.
Top-5 agrochemicals exports countries (2022)

Rank Country Value (US$ bn)
1 China 11.1
2 India 5.5
3 USA 5.4
4 France 4.1
5 Germany 3.9
India tops post-patent agrochem exports, PLI to boost domestic production

Of the total global agrochemicals market in 2022, 75% constituted post-patent
products, and India has emerged as a preferred global hub for sourcing post-patent
agrochemicals. USA leads in imports of agrochemicals from India, followed by Brazil
and Japan.
Recognizing the need to bolster domestic production, Crop Care Federation of India
(CCFI) has recommended certain measures to the Government of India to discourage
imports of ready-to-use pesticide formulations, which should would push farmers
towards domestically produced ones, boosting home-grown production and exports.
In the same vien, CCFI also made representation to the Finance Ministry seeking the
inclusion of agrochemicals under the Production Linked Incentive (PLI) scheme.
Trade surplus over the years

Year Exports from India (Rs. bn.) Imports (Rs. bn.) Trade Surplus (Rs. bn.)
2017-18 165 85 80
2018-19 221 93 129
2019-20 238 91 147
2020-21 265 124 141
2021-22 365 134 232
2022-23 432 143 289

India’s agrochemical exports: Performance attributed to technical capability –

quickly introducing post-patent products at competitive prices
6
4
$ bn
0
FY18 FY19 FY20 FY21 FY22 FY23
Source: WTO
Investments in agrochemicals to support growing demand
Indian manufacturers invest in R&D and partnerships for innovation

Historically, India has focused on manufacturing generic molecules in agrochemicals to
India shifts from generic manufacturing
meet domestic demand. However, manufacturers are now focusing on innovation for to domestic innovation and
the development of patented products – which are not only more profitable, but will international collaborations in
also give them a competitive edge. This shift is crucial to ensure India’s dominance in agrochemicals
this sector.
Nowadays, to bolster R&D activities, manufacturers are going on a hiring spree to

ensure they get the best scientists and experienced professionals on their teams.
Companies are also signing collaboration deals with international manufacturers to get
the benefit of their products and innovative processes.
Domestic manufacturers increase investments in R&D to trigger growth

Company R&D as a % of sales (FY22) R&D as a % of sales (FY23)
Rallis India 1.79% 1.98%
Dhanuka Agritech 0.36% 0.67%
Bayer Crop Science 2.00% 2.27%
Sumitomo Chemicals 0.43% 0.41%
UPL Ltd ~3.0% ~3.0%
Punjab Chemical Crop Protection 0.35% 0.30%
India Pesticides 2.00% 2.60%
Astec Lifescience 3.54% 12.26%
Insecticides India 0.62% 0.50%
Source: PhillipCapital India Research, Company Data

International manufacturers exploring India opportunity through JVs

Many global agrochemical giants are looking to partner with highly attractive Indian
agrochemicals firms to capitalise on opportunities in the country. These JVs would
serve various purposes including joint R&D, contract manufacturing, expansion of
distribution networks, product procurement, and better market reach.
International JVs provide Indian manufacturers access to technology, products, and distribution networks
Year Indian Company International Company Business
2013 Insecticides India OAT Agrio Co. Ltd R&D
2017 PI Industries Kumiai Chemical Initially to manufacture and distribute bispyribac sodium, add more products in the future
2020 Bharat Rasayan Nissan Chemical Corporation Manufacturing and exporting agrochemical active ingredients
LOI for development and commercialization of biological products using natural molecules and
2024 Dhanuka Agritech Kimitec
derived from natural sources
Indian manufacturers focusing on backward integration

The pandemic had a profound impact on agrochemicals manufacturing and exports
patterns, which led to manufacturers and suppliers re-evaluating their strategies. One
of these areas was backward integration – in addition to domestic manufacturing, India
also imports a considerable number of agrochemicals, which can reduce through
backward integration.
Some of the benefits of backward integration:

• Improved cost efficiency
• Increased competitiveness
• Control over quality
• Supply-chain stability
• Sustainable practices
Strong distribution network helps promote agrochemicals products among farmers

In order to increase market share, agrochemical manufacturers enter new markets,
increase brand awareness, and implement product innovation initiatives, all of which
are supported by vast distribution networks. They also invest in different brand
building initiatives through various advertising and promotion activities, including
television, digital campaign and brand awareness activities with our end users. This
robust distribution reach and infrastructure has enabled them to achieve success in
terms of gaining market share.
Dealer network of agrochemicals companies

Company No of dealers (FY23)
Rallis India 2,677
Dhanuka Agritech 6,500
Sumitomo Chemicals ~40,000
UPL Ltd 25,000+

India Pesticides 5,112
Insecticides India 70,000+

Opportunities for India in agrochemicals

#1: Off patent molecules: Unlocking new vistas
Off-patent molecules, as the name suggests, are those molecules or compounds that Off-patent agrochemicals (75% of the
global agrochem market) offer lower
are no longer covered by a patent, and are thus available for generic manufacturing.
costs and wider access, but face
These molecules are frequently used as active ingredients in generic versions of brand- challenges like limited uptake and
name medications and constitute 75% of the global agrochemicals market, which complex manufacturing processes.
provides manufacturers with an enormous opportunity. Fungicides and insecticides dominate
this growing US$ 4-5bn market
Some of the benefits of off-patent molecules are:
1. Lower cost
2. Increased availability
3. Improved safety
4. New research opportunities
Some observations about the off-patent market

• The market size of molecules going off patent is c.US$ 4-5bn.
• Around 30-40% of the off-patent active ingredients are taken up by generic
manufacturers.
• 60-70% are not taken up because their market size is limited, they are difficult to
manufacture, and their key intermediates are unavailable.
• Fungicides and insecticides are preferred to herbicides.
• In many cases, innovators go a step further and not only patent the molecule but
also the process of manufacturing that molecule, to prevent generic
manufacturers. In such cases, generic manufacturers find alternate processes for
developing the same molecule.
• Some of the molecules going off patent: Flubendiamide (insecticide, Bayer Crop
Science), Fluopicolide (fungicide, Bayer Crop Science), Fluopyram (insecticide,
Bayer Crop Science), Penflufen (insecticide, BayerCrop), Penthiopyrad (fungicide,
Corteva), Pyriofenone (insecticide, Ishihara), Pyroxsulam (herbicide, Corteva),
Saflufenacil (herbicide, BASF), Sedaxane (fungicide, Syngenta), Thiencarbazone-
methyl (herbicide, Bayer Crop), Valifenalate (herbicide, Ishihara), Cyantraniliprole
(insecticide, Corteva/FMC/Syngenta), Pinoxaden (herbicide, Syngenta), Sulfoxaflor
(insecticide, Corteva), Benzovindiflupyr (herbicide, Syngenta).
#2: Agrochemical consumption per hectare is very low in India

Increasing population and rising cases of pest attacks have led to higher per-hectare
application of agrochemicals, which in turn has increased global agrochemical
consumption. However, India has always recorded low per-hectare application over
the years, which provides an opportunity to domestic manufacturers.

Agrochemical use per hectare: India shows the least per hectare usage of
agrochemicals indicating the opportunity to increase the usage
12
10
8
kg/ hectare
0
Brazil China India Russia United USA
Kingdom
Source: PhillipCapital India Research, FAO
India low pesticide use (230gm/ha) makes it a net exporter

India recorded an average per-hectare chemical-pesticides consumption of 260
gms/hectare during 2018-23. In FY23, it was 230gms, which is much lower than the India uses far less pesticide per hectare
(230gms per ha) than world (2.6kg) or
world’s average of 2.6 kg per hectare, and that of Asia, which stood at 3.7 kg. This low
Asia (3.7kg), making it a net exporter
consumption has led to India becoming a net exporter of pesticides. In India, top-ten
states and union territories accounted for c.83 % of the total chemical-pesticides
consumption, of which Uttar Pradesh/Maharashtra were significant contributors at
23%/13%.
Per-hectare agrochemicals consumption in India remains State-wise consumption of agrochemical in India during 2022-
lower than the global average 23
Orissa, 3% Others, 6%
35% Karnataka, Uttar
Gujarat, 3% 3% Pradesh,
30% 23%
Chhattisgarh,
25% 3%
Rajasthan,
kg/ hectare
20% 4%
Tamil Nadu,
15% 4% Maharashtra
Andhra , 13%
10% Pradesh, 4%
5% West Bengal,
6% Punjab, 10%
Telangana,
0% Haryana, 8% 9%
2019 2020 2021 2022 2023
#3: India has a vast arable land, which boosts agrochemical potential
India has a huge potential to increase agricultural production as it has the second-
largest arable land in the world, which in turn provides a massive opportunity for its
growing crop-protection market. As more land comes under cultivation, protecting
crops from threats and boosting yields becomes vital for food security and
diversification. Notably, arable land comprises fields for temporary crops and kitchen
gardens, while permanent crop land is dedicated to crops that grow for long periods
and need not be replanted after each harvest (such as orchards). Together, they are
called arable and permanent crop land.

Top-5 countries with most arable land: India's #2 rank in arable land boosts
agrochemical potential
160
140
120
100
mn hectares
80
60
40
20
0
USA India Russia China Brazil
Arable land by country: Countries with high arable land are also the countries with high agrochemicals production
#4: Crop yields – higher yields lead to higher income for farmers
Crop yields refer to harvested production obtained per unit of harvested area for crop Crop yield is a measurement of the
products. Globally, a little more than one-third (35%) of potential crop yield is amount of usable product harvested
reportedly lost to pre-harvest pest attacks. Hence, use of pesticides becomes from a specific area of land in a single
increasingly important to ensure food production and food security. It is reported that growing season
without pesticide use, 78% of fruit production, 54% of vegetable production, and 32%
of cereal production would be lost to pest and disease attacks.

Historical region-wise and agri commodity wise yields

Wheat Rice Maize Wheat Rice Maize
5 Soybeans Beans 3.5 Soybeans Beans
3.0
4
Africa (tonnes / hectare)

India (tonnes / hectare)
2.5
3 2.0
2 1.5
1.0
1
0.5
0 0.0
1993
1991
2003
1991
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
1993
1995
1997
1999
2001
2005
2007
2009
2011
2013
2015
2017
2019
2021
Wheat Rice Maize Wheat Rice Maize
14 Soybeans Beans 8 Soybeans Beans
12
China (tonnes / hectare)
USA (tonnes / hectare)
6
10
8
4
6
4
2
2
0 0
1993
1991
2003
1991
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
1993
1995
1997
1999
2001
2005
2007
2009
2011
2013
2015
2017
2019
2021
#5: Bio-pesticides – the future of the agrochemicals industry

Bio-pesticides are used to control agricultural pests and pathogens; they are naturally
occurring compounds or agents that are obtained from animals, plants, and
microorganisms such as bacteria, cyanobacteria, and microalgae. For example, canola
oil and baking soda have pesticidal applications and are considered bio-pesticides. As
of 31 August 2020, there were 390 registered bio-pesticide active ingredients.
Classes of bio-pesticides – three major ones

1. Biochemical pesticides are naturally occurring substances that control pests by
non-toxic mechanisms. These include substances that interfere with mating, such
as insect sex pheromones, as well as various scented plant extracts that attract
insect pests to traps.
2. Microbial pesticides consist of a microorganism (e.g., a bacterium, fungus, virus or
protozoan) as the active ingredient. For example, there are fungi that control
certain weeds and other fungi that kill specific insects. The most widely used
microbial pesticides are subspecies and strains of bacillus thuringiensis.
3. Plant-Incorporated-Protectants (PIPs) are pesticidal substances that plants
produce from genetic material that has been added to the plant. For example,
scientists can take the gene for the Bt pesticidal protein and introduce the gene
into the plant's own genetic material.

Bio-pesticides’ market size; small but fast-growing, India lags

Currently, the global bio-pesticides market is US$ 3-4bn and is likely to see a CAGR of
While bio-pesticides market is booming
14.1%. The US bio-pesticides market is now estimated at c.US$ 205mn and is expected
globally (14% CAGR), with US leading,
to grow to c.US$ 300mn by 2030. North America consumes approximately 40% of the India is poised for smaller growth at
world’s bio-pesticides. According to India’s agricultural ministry, bio-pesticides 2.3% CAGR
currently account for only 2.9% of 100,000 metric tonnes of pesticides sold worldwide;
it is expected to grow by an estimated 2.3% annually.
Biopesticides: Mode of action
BIOACTIVE
COMPOUNTS 01 04 PARALYSIS
Mechanism of
METABOLIC
DISORDER 02 Biopesticides 05 INHIBITION
Action
REPELLANCE 03 06 PROTEIN DENATURING
Types of bio-pesticides
BIOPESTICIDES
Plant-incorporated Biochemical Microbial

protectants (PIPS) pesticides pesticides
Sex pheromones Example

Example Bacterial
Cristalliterous spore farmers
Cry1Ab Cry proteins Example biopesticides
Cry1Ac Obligate pathogen
Carposina sasaldi
Leptinatarsa decemlineata
Example
Fungal
Pyrenomycetes
Scented traps Hyphomycetes biopesticides
Example
Dv$nf7 RNA
dsRNA PIPs Example
Example
Bacteriocins, proteinaceous toxin Viral
produced by bacteria Boculovirus
Polydinavirus biopesticides
Example
Protozoa
Nosema genus
Valrimorpha genus biopesticides
Example
Nematod
Steinernema genus
Heteroehabditis genus biopesticides

Regional utilization of bio-pesticides
Bio-pesticide usage in India (%)
Viral, 4% Others, 1%
Bacterial, 29%
Fungal, 66%
India's biopesticide use greatly foliar, Maharashtra leads and Goa lags
In India, 90% of the biopesticides are used for foliar application (sprayed on leaves).
The country offers 970 Central Insecticides Board and Registration Committee (CIBRC)-
registered products. It produces approximately 29% (bacterial), 66% (fungal), 4% (viral)
and 1% other (plant-based, pheromone-based) biopesticides.
As per a ResearchGate report, Maharashtra uses the maximum amount of bio-

pesticides, whereas Goa uses the minimum. The overall consumption of bio-pesticides
has sharply increased in Rajasthan and Andhra Pradesh, while it has steeply decreased
in Orissa. In 2022, Maharashtra, West Bengal, and Karnataka consumed the most
biopesticides, at 5549, 4416, and 3478 MT each, whereas Himachal Pradesh and Goa
used the least, at 36 and 38 MT each.

#6: Drones to empower farmers in agricultural operations

Drones have the following applications in agriculture:
1. Analysis of soil and field
2. Seed planting with drones
3. Crop spraying
4. Crop monitoring
5. Irrigation
6. Crop surveillance
7. Tree/crop biomass estimation
8. Crop count and plant emergence analysis
9. Disaster risk reduction
10. Livestock monitoring
The use of drones in agriculture is helpful to farmers. Drones bring some distinct
advantages such as high field capacity and efficiency, less turnaround time and other
field operational delays, wastage reduction of pesticides and fertilizers due to high
degree of atomization, water saving due to ultra-low-volume spraying technology in
comparison to traditional spraying methods, reduction in cost of spraying and fertilizer
application in comparison to conventional methods, etc., besides reduction of human
exposure to hazardous chemicals.
The Ministry of Civil Aviation (MoCA) recently approved a Production-Linked Incentive

(PLI) scheme for drones and drone components. Salient features of the scheme are as
follows:
1. Total financial outlay: For three years starting from FY22, it is Rs 1.2bn; total PLI
per manufacturer is capped at Rs 300mn.
2. Eligibility norms depending on turnover: For MSME companies, annual sales
turnover has been kept at Rs 20mn (for drones) and Rs 5mn (for drone
components). For non-MSME companies, sales should be Rs 40mn (for drones)
and Rs 10mn (for drone components) respectively.
3. Excess incentive paid to any applicant: This would be adjusted in the incentives
payable for the next year or refunded to the government along with interest.
Drone market size

In 2020, the worldwide agricultural drone market was assessed to be worth US$
0.88bn. It is projected that the Indian agriculture drones’ market will experience a
quadruple expansion till 2028; 7.55% CAGR over 2023-2028, to touch US$ 34mn in
2028. Over the past few years, the Indian agricultural drone market saw substantial
growth, and it is expected to exceed a market worth of US$ 11bn by the end of 2032.
Key players in the market

Major manufacturers in India include AeroVironment, AgEagle, Israel Aerospace
Industries, Aerial Systems, DJI, America Roboticss, Microdrones, PrecisionHawk,
Trimble Inc., Yamaha Motor Corp and Parrot Drones. Other players in the market
include 3D Robotics Inc., Drone Deploy, GoPro, and Precision Hawk.

SWOT analysis
S W O T
1. Government initiative 1. High investment 1. Increasing popularity 1. Commercial drone
2. Increasing demand for 2. Continuous R&D 2. Easing restrictions for regulations across the
precision agriculture 3. High cost of agri- drone usage globe
3. Agri-drone benefits drones 3. Government policies 2. Competition
4. Technology 4. Lack of skilled drone for startups 3. High capital
advancement operators requirements for new
5. Government startups
regulations
STRENGTHS WEAKNESS OPPORTUNITY THREATS

China’s agrochem industry: Slowly gaining strength

Agrochemicals exports from China
• Herbicides: Leading exports with volumes of 1.4mn tonnes, up 15% yoy; exports
value US$ 6.94bn, up 89% yoy. Main markets – Brazil, Australia, the United States,
Nigeria, and Thailand.
• Insecticides: 323,000 tonnes, up 2.2% yoy; exports value US$ 1. 7bn, up 19% yoy.
Main markets – Brazil, Thailand, Bangladesh, Vietnam and Indonesia.
• Fungicides: 108,000 tonnes, down 2.6% yoy; exports value US$ 740mn, up 14%
yoy. Main markets – Indonesia, Australia, Vietnam, Brazil and Bangladesh.
Exports trend of China’s agrochemicals

Export Value (US$ bn) Export quantity (mn tonnes) (rhs)
12 3.0
10 2.5
8 2.0
6 1.5
4 1.0
2 0.5
0 0.0
2020 2021 2022
Agrochemicals registrations in China

Before 2017, in China, the annual new registered agrochemicals technicals (AIs, pure,
basic form of an agrochemical before it is formulated into a final product) ranged from China's new agrochemical registrations
200 to 400. However, after 2019, following new regulations and their requirements, (technical) significantly dropped after
this number went down to 10-70 annually. In terms of types, in 2023, China registered stricter regulations in 2019
a total 24 herbicide technical, and 17 each of fungicides and insecticides. According to
the statistics from agrochemicals manufacturers, a total of 67 companies obtained
exclusive exports registrations last year in China.
Technical registrations Export registrations

80 300
70
250
60
200
50
40 150
30 100
20
50
10
0 0
2019 2020 2021 2022 2023 2021 2022 2023
In 2022, Australia and Cambodia had the highest number of new registrations for
exclusive exports agrochemicals. Additionally, Brazil, Paraguay, the United States,

Indonesia, and others were among the countries with a relatively high number of
exclusive exports registrations.
Region-wise export registrations (2022)
Cambodia
Australia
Brazil
Paraguay
USA
Indonesia
New Zealand
Thailand
0 5 10 15 20 25 30 35
China agchem in 2023: Weak performance due to overcapacity and low prices
In 2023, Chinese agrochemicals companies with strong R&D capabilities, faced issues
such as overcapacity and low prices for active ingredients (AIs), which impacted their
profitability. Key factors that led to the poor performance include low prices, reduced
sales volumes, de-stocking, fierce competition, and heavy capex in new products.
China agrochemical industry production and exports data xx

Year Production (tonnes) Export (tonnes) Share of exports
2011 2,648,700 834,400 32%
2012 3,549,100 991,500 28%
2013 3,190,000 1,019,200 32%
2014 3,744,000 1,024,400 27%
2015 3,741,000 925,100 25%
2016 3,778,300 875,500 23%
2017 2,940,900 936,700 32%
2018 2,082,800 817,600 39%
2019 2,253,900 976,000 43%
2020 2,148,000 1,127,600 53%
2021 2,498,500 1,527,200 61%
2022 2,497,000 1,450,000 58%
H1 2023 1,230,000 571,382 46%
China's agrochemical production shrinks since 2014, down 1.8% in 2022

Between 2014 and 2021, the production of agrochemicals in China began to decline
gradually. In 2021, affected by the COVID-19 pandemic, growth stagnated. In 2022,
China’s pesticide output was 2.3mn tonnes, with a cumulative decline of 1.8% yoy. The
top-three provinces in terms of the production of technicals in China are – Jiangsu,
Shandong and Sichuan.

China’s technical manufacturing output Production trend of pesticide intermediates in China

4.0 5.4
3.5 5.3
3.0
5.2
2.5
mn tonnes
mn tonnes
5.1
2.0
5.0
1.5
4.9
1.0
0.5 4.8
0.0 4.7
2016 2017 2018 2019 2020 2021 2022 2016 2017 2018 2019 2020 2021 2022
Chinese agrochemical manufacturers are changing strategies to adapt to the new

market dynamics including expanding capacity, backward integration, geographic
expansion, new products, diversification into new herbicides, diversifying product
lines, investing in high-demand products.
Few examples:
1. Xingfa: Building 50,000 MTPA of new 2,4-D capacity to enter into another
herbicides category.
2. Nutrichem and Chang Qing: Adding capacity for S-metolachlor to capture market
share.
3. Lier: Continues to invest in capacity for L-glufosinate supporting raw materials.
4. Hebang: Focus on overseas production capacity construction of glyphosate.
5. Rainbow: Investing in pyroxasulfone capacity.
6. CAC Nantong: New prothioconazole capacity
7. Hebei Shanli (Hebei Chengxin): Building 10,000 MTPA of prothioconazole, 5,000
MTPA of trifloxystrobin, and 1,000 MTPA of kresoxim-methyl.
8. Hebei Nongbiwei: Invested in a new project with an annual production capacity of
5,400 MTPA of tebuthiuron, 1,800 MTPA imazapyr, 6,300 MTPA of clethodim, and
3,000 MTPA of mesotrione.

3
5
7
9
11
13
15
20
30
40
50
60
70
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Aug-21 Jul-21
Oct-21 Sep-21
Dec-21 Nov-21
Feb-22 Jan-22
Apr-22 Mar-22
Jun-22 May-22

Aug-22 Jul-22
China: Prices of technicals
Oct-22 Sep-22
Dec-22 Nov-22
Jan-23
Feb-23

Mar-23
2,4 -D 98% (US$/ kg)

Apr-23
Bifenthrin 97% (US$/ kg)

Glyphosate 95% (US$/ kg)
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
3
5
7
9
11
13
15
12
17
22
27
32
37
42
47
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
Aug-21 Aug-21 Jul-21
Oct-21 Oct-21 Sep-21
Dec-21 Nov-21
Dec-21
Feb-22 Jan-22
Feb-22
Mar-22
Apr-22 Apr-22
May-22
Jun-22 Jun-22

Jul-22
Aug-22 Aug-22
Sep-22
Oct-22 Oct-22
Nov-22
Dec-22 Dec-22
Jan-23
Feb-23 Feb-23
Mar-23
Apr-23 Apr-23
Mancozeb 80% (US$/ kg)
Glyphosate 95% (US$/ kg)
May-23
Imidacloprid 96% (US$/ kg)

Jun-23 Jun-23
Jul-23
Aug-23 Aug-23
Sep-23
Oct-23 Oct-23
Nov-23
Dec-23 Dec-23
Jan-24
Agriculture in GDP
The agricultural sector has demonstrated notable resilience in contrast to the wider
economy. Despite the pandemic's adverse effects on overall GDP, agriculture, value
added, has consistently seen growth, underscoring its fundamental role in fulfilling
basic human needs and its relative stability during periods of crisis.
• Global GDP grew by 3.1% annually on average to touch US$ 86tn in 2021 from US$
18tn in 1970.
• During the last decade, average annual growth rate of global GDP decreased to
2.6%. Due to covid, GDP plummeted by 3.2% to US$ 81.2tn in 2020 from US$
83.8tn in 2019.
• In 2021, as the global economy was recovering from the pandemic, it soared by
6%.
• The global agriculture value-added increased steadily by 2.8% each year on
average, to US$ 3.7tn in 2021 from US$ 2.9tn in 2012; it kept increasing despite
pandemic.
Global agriculture value added by region

Africa Americas Asia Europe Oceania
100%
80%
60%
40%
20%
0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Average annual growth rate of agriculture value added

Africa Americas Asia Europe Oceania World
6
-1
1972-81 1982-91 1992-2001 2002-2011 2012-2021

Agriculture, forestry, and fishing, value-added (% of GDP)/year

Argentina Australia Brazil
China India Latin America and Caribbean
North America Russia United Kingdom
United States World
30
25
20
15
%
10
Agriculture, forestry, and fishing, value added (% of GDP)/year

India's agricultural sector's GDP share has declined due to industrial and service sector
growth, indicating economic development. Yet, agriculture remains a vital
employment source for half the workforce. The government's focus on modernizing
agriculture is evident in budget allocations, export targets, and efforts to attract foreign
investments, aiming to boost productivity and farmer incomes.
• Share of agriculture in India's GDP declined to 15% in FY22 from 35% in FY1991
due to rapid growth in the industrial and service sector.
• In India, agriculture is the primary source of livelihood. According to the
government, c.46% of India’s total workforce is employed in the agriculture sector.
• At current prices, agriculture and allied sectors account for 18.3% of India's GDP
(2022-23).
• As per Budget 2022-23, Rs 20tn (US$ 24.41bn) agricultural credit was targeted at
animal husbandry, dairy and fisheries.
• For FY24, an export target of US$ 23.56bn was fixed for the agricultural and
processed food products basket and exports of US$ 17.44bn have already been
achieved in 8MFY24.
• Between April 2000 and June 2023, FDI in agriculture services stood at US$ 4.75bn.
• Bain & Co. estimates the Indian agricultural sector to increase to US$ 30-35bn by
2025.

Share of GVA in agriculture

Share of GVA of Agriculture and Allied Sectors in Total Economy (%) (at current prices)
Share of GVA of Agriculture and Allied Sectors in Total Economy (%) (at constant prices)
24%
22%
20%
18%
16%
14%
12%
FY16
FY21
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY17
FY18
FY19
FY20
FY22
FY23
Agriculture, forestry, and fishing, value added (% of GDP) – India

45
40
35
30
%
25
20
15

Challenges in the agrochemical industry

Strict regulations slow innovation and burden suppliers: Global agrochemical regulations hike
The worldwide agrochemical sector is subject to several national and international development costs and hinder new
rules, which is driving up the cost of creating new products. New product introductions product launches, especially for foreign
to the market are halted since producers have to take many laws into account. These companies facing extra testing
requirements
procedures make it more difficult for foreign suppliers, who must carry out extra
research and testing to obtain authorization for the agrochemical's sale in the region.
Rising popularity of pest-resistant GM crops reduce the use of agrochemicals

Such crops are extensively used in the US and are further used in industrial-scale
biofuel. This development can pose a risk to the growth of the global agrochemicals
market.
Adverse effect of continued and incorrect use of agrochemicals oh life and soil health
It has also led to diseases such as Alzheimer’s, autism, asthma, and diabetes.
Sometimes, agrochemicals also get mixed with local water supply and have impacted
the health and safety of residents. Hence, there have been restrictions on the extreme
use of agrochemicals.
Usage of counterfeit and spurious products driven by pricing and shortfalls GM crops and stricter regulations
The unavailability of pesticides at different locations gives an opportunity for spurious challenge agrochemical market growth,
products to make their way. The usage of these counterfeit products could affect crops fake products pose safety and
adversely, thus harming the honour of the agrochemicals industry and its sales. Lack of reputation risks
knowledge among farmers also contributes towards the growth of such products.
Destocking: China dumped chemicals, hurting Indian agrochemical exports

In the latter half of FY23, after China’s economy restarted, it started dumping cheaper
agrochemicals in the global market, which led to piling up of inventory in India and
international markets. China's cheap exports hurt India's
agrochemical sales in FY23, causing
The inventory build-up in international markets was significantly higher compared to inventory pileups and declines in profit
India. In addition to this, prices of technical started to correct significantly. Hence,
domestic manufacturers were not able to clear up existing high-priced inventory. This
led to significant yoy margin compression and decline in earnings.
After China opened up its economy and started selling cheaply, India's exports came
under pressure. In FY23, they fell 21% in volume and 2% in value (to US$ 23.8bn)
compared with 39% value growth in FY22 to US$ 24.3bn and 14% volume growth.
Exports of agrochemicals fell in volume terms.
El Niño continues to weaken, 55% chance of La Niña in June-August 2024

• El Niño persists, although a steady weakening trend is evident in the oceanic
indicators. Sea surface temperatures in the central tropical Pacific and
temperatures in the Pacific sub-surface show a clear cooling trend, in line with El Niño is weakening and likely to
typical event decay. transition to neutral conditions by April-
• International climate models suggest the central tropical Pacific Ocean will June. La Niña may develop by August,
continue to cool in the coming months, with four of seven climate models potentially improving monsoon rains
indicating the central Pacific is likely to return to neutral El Niño–Southern compared to last year. Forecasts beyond
Oscillation (ENSO) levels in April (i.e., neither El Niño nor La Niña), and all models May are uncertain due to warmer
neutral in May. global oceans.
• ENSO predictions made in late summer and autumn tend to have lower accuracy
The Indian Ocean Dipole is currently
than predictions made at other times of the year. This means that current
neutral and expected to remain so until
forecasts of the ENSO state beyond May should be used with caution. at least April – which means less impact
• Based on the historical record from 1900, around 50% of El Niño events have on rainfall patterns in nearby regions
been followed by a neutral year, and 40–50% have been followed by La Niña. for the coming months
However, global oceans have warmed significantly over the past 50 years. The
oceans have been the warmest on record globally between April 2023 and

January 2024. These changes may make a difference when predicting future
ENSO events based on historical activity.
• The Indian Ocean Dipole (IOD) is neutral. The majority of model forecasts indicate
the IOD will be neutral until at least April, consistent with the annual cycle of the
IOD.
• Two global climate agencies stated last week that El Nino is weakening and there
is a chance for La Nina conditions to set in by August. Indian weather scientists
believe that if La Nina conditions set in by June-August, monsoon could be
improved compared to last year.
• The National Weather Service says 79% chance of transition from El Niño to ENSO-
neutral is likely by April-June 2024, with 55% chance of La Niña developing in June-
August 2024.
Commentaries of global companies

Company Commentary
The company is anticipating the full year (2024) global market to be flat to down low-single digits as a softer first half is expected to be
followed by the resumption of historical, low-single digit percentage growth in the second half. The exception to this forecast is India,
where they expect the market to be down for the full year primarily due to high channel inventory that the entire industry is carrying as
FMC
a result of multiple seasons of unfavorable monsoons. They expect moderate pricing pressure in the year, with the largest impact in the
first half. FX is also expected to be a minor headwind for the year. Growth of new products and benefits from restructuring are expected
to be offset by higher cost of inventory carried forward from prior year, lower fixed cost absorption and modest pricing pressure.
Sales at crop science fell mainly due to the significant price decline for glyphosate-based products. By contrast, the division achieved an
Bayer AG
above-market sales growth of 7% in its core business, excluding glyphosate, thanks especially to price increases.
The company is expecting volume growth coupled with pricing pressure leading to lower single digit sales growth. They expect the
effects of destocking to linger through the 1H 2024 in certain regions. They expect volume growth to be mid-single digit in Latin America
Corteva
driven by global demand for new and differentiated products. New Crop Protection product volume is expected to be up high single
digits, driving incremental organic revenue.
The company has delivered on inventory reduction. Despite challenges in 2H, they have reported growth in North American business
Nufarm
and Europe.
In the first nine months of 2023, the industry-wide channel destocking continued as distributors and retailers further reduced
Syngenta inventories they built up in response to the supply chain disruptions of 2022. However, high working capital costs for customers due to
sustained higher interest rates prompted many channel partners and farmers to order closer to application.
The company is expecting decline in sales of approximately 12-21% (Q4 results not announced) reflecting lower volumes and prices as
well as the negative impact of exchange rates. The lower sales reflect market dynamics of high channel inventories, last-minute
Adama purchasing following channel destocking in light of high interest rates and pressure on crop protection product pricing due to the lower
channel demand and lower active ingredient pricing. In response to the market conditions the Company has taken active measures to
manage its COGS, procurement and OPEX that have led to a decrease in the level of inventory held and a decrease in operating expenses.
Sumitomo Chemical
Major reduction in crop protection inventories in South America. 4Q should be a strong season for demand for crop protection products.
(Japan)

Appendix
I. Pesticides ban
2020 order banning pesticides
On 18th May 2020, the Ministry of Agriculture released a draft order to ban 27
pesticides that they considered harmful for animals and humans. The 27 molecules (8
fungicides, 12 insecticides and 7 herbicides) cumulatively had over 130 formulations
and combinations with a business value of about Rs 155bn, including exports. The
original notification had listed the cause for banning each of the 27 pesticides, ranging
from hormone disruption, carcinogens, and toxicity to flora and fauna.
Complete list of 27 banned pesticides

LIST
❖ Acephate ❖ Carbendazim ❖ Dicofol ❖ Mancozeb ❖ Quinalphos ❖ Zineb
❖ Atrazine ❖ Carbofuran ❖ Dimethoate ❖ Methomyl ❖ Sulfosulfuron ❖ Ziram
❖ Benfuracarb ❖ Chlorpyriphos ❖ Dinocap ❖ Monocrotophos ❖ Thiodicarb
❖ Butachlor ❖ 2,4-D ❖ Diuron ❖ Oxyfluorfen ❖ Thiophanate Methyl
❖ Captan ❖ Deltamethrin ❖ Malathion ❖ Pendimethalin ❖ Thiram

The draft order was challenged in the courts of law, as it included widely used
pesticides, a majority of which had no substitutes. After 3 years of deliberation, the
Ministry of Agriculture decided to ban 3 out of 27 pesticides – dicofol, dinocap, and
methomyl due to the health hazards that they posed. The ministry also banned
monocrotophos.
State-level bans and restrictions in India

• Of the 27 pesticides banned in the May 2020 draft order, few are already
addressed by state level regulations/bans in India.
• Monocrotophos was banned briefly by Adilabad District Collector and Ooty District
Collector due to rampant illegal use and toxicity potential on food, environment
and farmers in 2019.
• In 2018, Punjab Agriculture Department had sought to review licenses and not to
issue fresh licenses for five (2,4-D, benfuracarb, dicofol, methomyl and
monocrotophos) of the 27 pesticides because of harmful effects on human beings
and environmental sustainability as well as economic viability.
• Maharashtra government prohibited 2 of them (monocrotophos and acephate) a
couple of times in 2017 and later, as they were implicated in the high incidence of
pesticides poisonings among cotton farming community.
• Kerala already banned some of these pesticides such as monocrotophos,
carbofuran, atrazine, etc. way back in 2011, on the grounds of public health
concerns.
• The Telangana government has declared a complete ban on the controversial
herbicide, Glyphosate.
International bans: 531 products are banned, most in the EU and UK

As of 2022, countries have banned a total of 531 pesticide active ingredients or groups
of actives regarded as still ‘currently in use’ in the global market, i.e. not considered to
be obsolete. This includes 73 newly added active ingredients. The countries with the
most known bans are those of the EU and the UK (195 banned + 269 specifically ‘not
approved’ pesticides which are Highly Hazardous Pesticides (HHPs) and/or banned by
another country, Turkey (212), Saudi Arabia (201) Switzerland (141), Egypt (140), Brazil

(133), USA (21 banned plus 81 ‘voluntarily withdrawn’), Morocco (70), Indonesia (62),
Cambodia (60), India (56), Mauritania (52), Palestine (52), and China (54).
(Above data from PAN International)
Notable mentions
Glyphosate ban
Glyphosate is a widely used broad-spectrum herbicide that controls broadleaf weeds
and grasses. It has been registered as a pesticide in U.S. since 1974. In 2015, WHO's
cancer agency said that the active ingredient was "probably carcinogenic". It was up
for renewal of registration in December 2022 but it was extended for a year while
scientists reviewed its safety.
Region-wise regulation for Glyphosate

Country Remark
France, Netherlands and Belgium banned for household use
Germany banned for use in public spaces
Austria and Luxembourg tried but failed to ban
Colombia and El Salvador banned and then overturned the decision
Mexico pledged to outlaw its use by 2024
Vietnam fully banned
Sri Lanka Tried to ban in 2015 but then cancelled the ruling in 2021
A look at the status of glyphosate in a few regions/countries around the world

• European Union: On 28 November 2023, the European Union published a 10-year
extension for glyphosate, extending its EU-wide approval period until 15
December 2033. However, the regulation did not have the support of a “qualified
majority” of EU member states.
• Germany: On 27 December 2023, Germany’s BMEL published emergency
regulations on glyphosate, which suspends the total ban on glyphosate and
regulate existing restrictions on its use, according to ECHEMI. The Act came into
effect on 1 January 2024 and will remain in effect for six months until 31 June 2024,
when previous restrictions and sanctions on the use of glyphosate will also expire.
• India: The Union Ministry of Agriculture and Farmers Welfare decided to restrict
glyphosate usage through a notification ‘Restriction on use of Glyphosate Order,
2022’ dated 21 October 2022. States such as Maharashtra, Telangana, Punjab, and
Andhra Pradesh tried to temporarily restrict its usage as they do not have tea
plantations, but ended up overturning it. In 2019, Kerala brought stringent
restrictions including cancellation of licenses for glyphosate-based herbicides in its
jurisdiction.
The Pesticide Management Bill, 2020

The Pesticide Management Bill, 2020 was introduced in Rajya Sabha on 23 March 2020
by the Minister of Agriculture and Farmers Welfare, Mr. Narendra Singh Tomar. It
replaces the Insecticides Act, 1968.
Highlights of the Bill

• Regulates pesticides to ensure availability of safe and effective pesticides and
minimise risk to human beings and the environment. It also seeks to promote
biological pesticides.
• Sets up a Registration Committee at the central level to register pesticides and
thereafter, amend, suspend or cancel registration. The Committee cannot register
a pesticide if its maximum residue limit on crops has not been specified under the
Food Safety and Standards Act, 2006.

• The Registration Committee is empowered to periodically review registered

pesticides. It is also required to perform such a review on reference from the
central or state government.
• States are responsible for issuing licenses for manufacture, storage and sale of
pesticides. States (and the centre) will appoint Pesticide Inspectors and Analysts
to monitor compliance of licensees with provisions of the Bill.
• The Bill constitutes a Compensation Fund to make payments to persons who suffer
harm due to pesticides poisoning.
II. Registrations processes in India

In India, pesticide registration applications have to be submitted electronically to the
Central Insecticides Board & Registration Committee (CIBRC) through their online
platform, the Computerized Registration of Pesticides (CROP). This system aims to
streamline the entire registration process.
Registration process
Apply for RTT in form C for

Inclusion in the insecticide
import permission of
schedule and planning the Check the data
sample for bioefficacy and
subsequent category of requirement as
toxicity testing to comply
registration under 9(3) or 9 per the category
with requirement (not
(4)
required for 9(4) category)
The data is scrutinized by

the respective expert
Application in form I to RC
committee, on evaluation
Submitted data to RC + payment of the fees by
RC grant the registration
demand draft
certificate in form II and III
depending upon the case
The following categories of pesticides are regulated by CIB&RC:

The Pesticides Act of 1968 regulates the
• Plant protection products import, manufacture, sale,
• Plant growth regulator transportation, distribution and use of
• Seed treatment pesticides in India
• Household pesticides
• Public use pesticide
• Bio-pesticides
• Biocides
The categories of plant protection products (PPP) registration

• Regular registration: u/s 9 (3) – new registration
• Provisional registration: u/s 9 (3b) – usually granted for a period of 2 years.
• “Me-Too Registration”: u/s 9 (4) – It is a consecutive registration of original 9(3)
registration of a molecule
• Endorsement cases (Legal, administrative, and technical)
Categories are further divided as:

• Import of the technical grade material/formulated product – TI, FI
• Manufacturing of technical grade material/formulated product – TIM, FIM
• Registration of new technical source – TI (new source)

Estimated time taken registering pesticides in India

Activity 9(4) 9(3) & 9(3b)
Documentation and Form 1 and other documents verification by legal 0.5 month 1 month
CIB&R analysis covering chemistry, bio-efficacy, toxicology and packaging 1-3 month 6-12 months
Sample submission, collection and analysis 2-6 months 2-6 months
MRL fixation (Ministry of health) 1-3 months 3-12 months
Registration certificate issuance 2 months 2 months
Overall Process Minimum 6 months Minimum 12-36 months
On 22nd December 2020, CIB&RC decided to adopt a policy mandating the registration
of ‘technical grade’ pesticides in India. Additionally, applicants of FI-WRT (Formulation
Import Without Registering Technical) are encouraged to seek registration for
‘technical’ materials. With this update, the CIB&RC wants to emphasize the need to
register technicals first. Even if a manufacturer wants to market formulation, it cannot
register formulations directly.
Breaking down India's agchem registrations (2022-2023)

Over 2022-23, the Indian government approved 32 new molecules, of which 8 were
insecticides, 15 were fungicides, 8 were herbicides, and 5 came under ‘others’. In the
same period, the GoI approved a total of 1,309 product agenda items (specific
formulations or brands) and rejected 206. On average, 4 new compound products
(combinations of two or more active ingredients) are registered per month.
Recent registrations of agrochemicals in India

Applicant Product Approved/ Rejected Type
Anupam Rasayan India Penconazole technical 95.00% w/w min Approved 9(3)
BASF Ddimjpropyridaz technical 95% Approved 9(3) TI
BASF Dimpropyridaz 120 g/l SL formulation Approved 9(3) TI
Bayer Crop Science Tetraniliprole 10.08% + Thiacloprid 30.25% SC Approved 9(3)
UPL Ltd Glufosinate ammonium 50% WG Approved 9(3)
UPL Ltd Glufosinate ammonium 14.3% + Glyphosate (isopropyl ammonium) Approved 9(3)
UPL Ltd Sodium acifluorfen technical 39% w/w min Approved 9(3) TIM
UPL Ltd clethodim technical 92.40% w/w min Approved 9(3) TIM
UPL Ltd Cyazofamid technical 93.5% w/w min Approved 9(3) TI
Bharat Rasayan Ltd Prallethin technical 96% w/w min Approved 9(4) TIM
Bharat Rasayan Ltd Cyazofamid technical 95% w/w min Approved 9(4) TIM
Bharat Rasayan Ltd Atrazine technical 95% w/w min Approved 9(4) TIM
Dhanuka Agritech Ltd Pendimethalin technical 90% w/w min Approved 9(4) TIM
Dhanuka Agritech Ltd Lambda cyhalothrin technical 84% w/w min Approved 9(4) TIM
Heranba Industries Ltd Tembotrione technical 94% w/w min Approved 9(4) TIM
UPL Ltd Halosulfuron methyl technical 97% w/w min Approved 9(4) TIM

COMPANIES SECTION

Dhanuka Agritech Ltd (DAGRI IN)

Innovations and collaborations to drive growth
18 March 2024
INDIA | AGRICULTURE | Initiating Coverage
We initiate coverage on Dhanuka Agritech (DAGRI) with the following rationale:
1. DAGRI has a well-diversified portfolio of products across insecticides and herbicides as
BUY
CMP RS 977
well as across crops.
TARGET RS 1,187 (+21%)
2. It has a well-entrenched distribution network across the country.
3. It has long-standing relations with reputed MNC technical manufacturers. This allows it SEBI CATEGORY: SMALL CAP
entry into speciality products, which means better margins than generic products.
COMPANY DATA
4. The increased revenue contribution from speciality formulations, where the company
O/S SHARES (MN) : 46
has a healthy pipeline of product launches, is likely to boost DAGRI’s profit margins. MARKET CAP (RSBN) : 45
5. It is also likely to reap the benefits of backward integration from its technical MARKET CAP (USDBN) : 0.5
52 - WK HI/LO (RS) : 1,298 / 603
manufacturing plant at Dahej.
LIQUIDITY 3M (USDMN) : 1
6. DAGRI has developed a pan-India distribution network, comprising +7,000 distributors PAR VALUE (RS) : 2
and +80,000 retailers with a network of more than 1,500 field agents that connect with
over 10mn farmers across the country. SHARE HOLDING PATTERN, %
Dec 23 Sep 23 Jun 23
PROMOTERS : 70.2 70.2 70.2
Strong product portfolio alleviates concentration risk: Not only does DAL has a well- DII : 18.4 18.2 17.2
diversified portfolio of products across insecticides and herbicides as well as crops, it also has FII : 1.3 2.2 3.5
a well-entrenched distribution network across the country. As a result, its performance is OTHERS : 10.1 9.4 9.0
largely protected against the poor performance of a particular crop or region.
PRICE PERFORMANCE, %
1MTH 3MTH 1YR
Long-term collaborations help deliver quality products: DAGRI continues to have technical ABS (10.3) (6.4) 47.7
collaborations with MNCs like BASF, AMVAC Chemical Corporation, Corteva Agri Sciences, REL TO BSE (10.8) (8.4) 22.3
FMC Corporation and Oro Agri of USA; Arysta Life Science, Hokko Chemical Co. Limited, Mitsui
Chemicals, Inc., Nissan Chemical Corporation, Nippon Soda Co., Ltd. and OAT Agrio Co., Ltd of PRICE VS SENSEX
Japan. With these collaborations, it has introduced a good number of eco-friendly, highly 180
effective pesticides, immensely benefiting the farming community across the country in terms
160
of enhancing on-farm income.
140
Strong domestic presence: It has a pan-India presence with 6,500 distributors and dealers 120
and 80,000 retailers, reaching 10mn farmers' touch-points. This enables DAGRI to ensure that 100
they are able to reach out to as many farmers across the country as possible. 80
Mar-21 Mar-22 Mar-23 Mar-24
DAGRI IN BSE Sensex
Foray into technical manufacturing to aid sustainable growth: The company has started
operations at its Dahej chemical synthesis plant, and is working on establishing a new R&D
KEY FINANCIALS
laboratory for research on chemical processes. At the same site, it has started manufacturing
Rs mn FY24E FY25E FY26E
making bifenthrin technical for now, but will be adding few more products. Also, this was the
Net Sales 17,049 18,242 19,702
first phase of capex at Dahej; it will soon begin the second phase, for which the management EBITDA 3,018 3,192 3,389
has hinted it could be for CDMO and/or manufacturing 2-3 new products. Net Profit 2,269 2,415 2,576
EPS, Rs 50 53 57
Robust long-term growth outlook – initiate with BUY PER, x 19.5 18.3 17.2
In a challenging scenario, DAGRI continues to report commendable performance, which is a EV/EBITDA, x 14.8 14.0 13.2
proof of the management’s ability to make timely decisions on product launches, cost saving PBV, x 3.9 3.6 3.3
initiatives, inventory management, etc. It has been upgrading and tailoring its products and ROE, % 20.8 20.4 19.8
services to the changing landscape of Indian agriculture. It has been able to successfully
execute the Dahej project, which should launch the company into its next growth phase. It
Harmish Desai, Research Analyst
has also announced getting into biologicals, which is in tune with the government’s need to [email protected]
reduce chemicals in agriculture. It has a good distribution-led business model, with robust
ratios and a strong balance sheet. We believe DAGRI can be well placed to benefit from a
return to normalcy in agrochemicals, given its strong product portfolio, new launches every
year (in collaboration with global MNCs) and solid distribution network that will help it to
reach newer markets. We initiate coverage on DAGRI with a Buy rating and a target of Rs
1,187, 21x FY26 EPS.

DHANUKA AGRITECH LTD INITIATING COVERAGE
Expansive product portfolio to support growth

• Wide product portfolio against a wide range of pests and diseases, Portfolio is
largely distributed across the insecticides, herbicides and fungicides segments.
• In FY23, to strengthen its portfolio, it introduced products such as Decide
(insecticide), Zanet (fungicide), Terminal (herbicide), and Cornex (herbicide).
• Insecticides contributes a significant portion of its overall revenues.
• Aims to ramp up its presence in the fast-growing herbicides segment.
• In 9MFY24, DAGRI launched two 9(3) molecules.
DAGRI has consistently launched new products every year

Year Name Type
Maxx-Soy Herbicide
Conika Fungicide
Fujita Fungicide
FY17 HI-Dice Super Fungicide
Bullon Insecticide
Aashito Insecticide
Delight Fungicide
Dumil Herbicide
Fenox-1000 Herbicide
Godiwa Fungicide
Godiwa Super Fungicide
FY18
Marker Super Insecticide
D-one Insecticide
Suelo Soil health enhancer
Domar Insecticide
Apply Insecticide
FY19 Largo Thripicide
Chempa Herbicide
Mycore Soil health enhancer
Zapac Insecticide
FY20
Pro-rin Insecticide
Prodhan Insecticide
Dabooch Herbicide
DozoMaxx Herbicide
Kirari Fungicide
FY21
Nissodium Fungicide
Craze-D Herbicide
Ripple Insecticide
Onekil Herbicide
FY22
Tornado Herbicide
Zanet Fungicide
Decide Insecticide
Implode Herbicide
FY23 Mesotrax Herbicide
Downil Biological fungicide
Spornil Biological weedicide
Whiteaxe Insecticide
Tizom Herbicide
YTDFY24
Semacia Insecticide

Particulars Herbicides Fungicides Insecticides Others

% of Revenues
35% 21% 32% 12%
(Q3FY24)
Barrier 70% WP, Chernpa 70% Zanet 40.21% SC, Nissodium 5% Aaatank 25% EC, Ad-Tyre 75% WG,Dhanuvit, Dhanvarsha, Dhanzyrne
WDG, Cornex 53% WG, Craze, EW, Lustre 37.5% SE, Kirari 20% Apply 50% WG, Areva 25% WG, Gold, Dhanzyrne Gold Gr.,
Craze-X 37% EW, Dabooch 84% W/V SC, Conika, Kasu-B 3L, Vitavax Areva Super 30% FS, Caldan 4G, Dhanzyrne Granules, Maxyld
WDG, D-era 71% SG, Dhanutop 75% WP, Vitavax Power, Vitavax Caldan 50 SP, Cover Granules, 0.001%, Wetcit, Mycore,
30% EC, Dhanutop Super, Ultra, Cursor 40% EC, Dhanucop Cover Liquid, Decide 31% WG, Nernataxe 5% WP, Whiteaxe 1.0%
Dhanuzine 50% WP, Dozo Maxx 50% WP, Dhanuka M-45 75% WP, Deva 2.5% EC, Deva Shakti 5% EC, WP, Sporeriil 2.0% AS, Dowriil
10% MEC, Dynofop, Fenox-1000 Dhanustin 50% WP, Godiwa Super Dhanpreet 20% SP, Dhanulux 25% 2.0% AS, Anti Itching Powder,
5.1% EC, Irnplode 29.73% Sc, (Azoxy+Difen), Hexadhan 5% EC, EC, Dhanusan 50% EC, Dhanvan Suelo, Myconxt, Omninxt
Maxxsoy, Mesotrax 24.97% SC Hexadhan Plus, Nissodium 5% EW, 20% EC D- One, Erri-1.5% WG, Fax
Key Products
W/W, Nabood 40% DF, Noweed Sheathinar 3L, Sixer 75% WP, 5% SC, Foster, Jackal 4.9% CS,
41% SL, Onekil 10% EC, Oxykill Spectrum, Thiram, Zerox 25% EC Largo, Markar 10% EC, Media
23.5% EC, Ozone 24% SL, Qurin, 17.8% SL, Media Super 30.5% SC,
Sakura, Sernpra 75% WG, Targa Mortar, Omite 57% EC, Pager 50%,
Super 5% EC, Terminal 13.5% Ripple 75% SG, Super D,
W/W SL, Tornado 22.5% EC, Superkiller 10% EC, Superkiller
Weedmar 38% EC, Weedmar 80% 25% EC, Zapak ZC, Defend 10% SC,
WP, Weedrnar Super 58% Semacia 15% ZC
SL,Tizorn 56% WG
New molecules as a % of total revenue

0.21
0.19
0.17 New products are those introduced in

the last three years. DAGRI has targeted
more than 20% revenues from new
0.15 products in FY25
0.13
0.11
0.09
FY18 FY19 FY20 FY21 FY22 FY23 9MFY24
Dhanuka enters into the bio-pesticides segment

DAGRI entered the agri-biological (bio-pesticides) segment with the launch of its
organically-sourced “BiologiQ” range of products for crop protection, soil health, and
plant nutrition. These products can be used individually or in combination with
conventional chemical products under an Integrated Pest & Nutrition Management
(IPNM) plan to produce powerful results for the crop and the soil.
BiologiQ range has 6 products: Whiteaxe biological insecticide, Nemataxe biological

insecticide, Downil biological fungicide, Sporenil biological wilticide, Myconxt biological
biofertilizer and Omninxt biological biofertilizer.

DAGRI expects industry bio-pesticides CAGR at 18-20%, BiologiQ range will help it to
capitalize on this growth
Source: Company Data
Product launches in FY23 through collaborations

It has international collaborations with 10 leading global agrochemical companies from
the U.S., Japan and Europe, which helps it to introduce the latest technology in India.
These include Corteva Agri Sciences, FMC Corporation & Oro Agri of USA, Arysta Life
Science, Hokko Chemical Co. Limited, Mitsui Chemicals, Inc., Nissan Chemical
Corporation, Nippon Soda Co., Ltd. & OAT Agrio Co., Ltd of Japan. In this way, it has
introduced a many eco-friendly, highly effective pesticides across the country.
Examples of few launches through such collaborations are:

Collaborating
Name Country Type Action
company
• Broad spectrum, selective, post-emergence, and systemic herbicide
• One shot solution for farmers for controlling major broad and narrow leaf weeds and sedges
Cornex Nissan Chemical Japan Herbicide (Cyperus rotundus) in maize crops.
• CORNEX will empower maize farmers by its dual mode of action, which will help to control major
weeds in their crops to enhance productivity and increase their income.
Hokko Chemical • Broad-spectrum, strong systemic fungicide providing excellent control against bacterial leaf spot
Industry Ltd., Fungicide & and powdery mildew in tomatoes.
Zanet Japan
Japan and Nippon Bactericide • ZANET reduces the number of sprays helping farmers to obtain better yield and quality in a
Soda Co., Ltd. cost-effective way.
• Powerful insecticide available in WG formulation; has excellent efficacy against sucking pests in
Decide Mitsui Chemical Japan Insecticide chilli to help farmers get control over multiple pests with a single spray, without the need of
mixing different insecticides.

Financial performance
Decent revenue performance expected with increase in Steady cashflow generation from operations
contribution from new products
Revenue Growth 4000
25000 30%
3500
25%
20000 3000
20% 2500
15000
Rs mn
Rs mn
2000
15%
10000 1500
10%
1000
5000
5%
500
0 0% 0
FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Source: PhillipCapital India Research, Company Data Source: PhillipCapital India Research, Company Data
Steady margin expansion expected from backward Working capital pressure expected to decrease with growth
integration and revenue from new products in volumes
Gross Margin EBITDA Margin Inventories Trade receivables
45%
Trade Payables Working capital days
40% 140
35% 120
30% 100
25%
80
20%
60
15%
40
10%
20
5%
0% 0
Steady profitability ratios seen going ahead See increase in R&D with new collaborations and
partnerships
ROCE % ROE %
40 0.007
35
0.006
30
0.005
25
20 0.004
15
0.003
10
0.002
5
0 0.001
FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY19 FY20 FY21 FY22 FY23

Herbicides and insecticides continue to lead Western and southern markets key due to crop diversity
Insecticides Fungicides Herbicides North West East South
8000 6000
7000
5000
6000
4000
5000
Rs mn
Rs mn
4000 3000
3000
2000
2000
1000
1000
0 0
FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY19 FY20 FY21 FY22 FY23
Capex and opportunity with Kimitec LoI

DAGRI has completed capex of Rs 2.3bn at Dahej for the manufacturing of bifenthrin
technical, which it will mostly use captively. The project will take approximately 2-3
years to turn net profit.
It has signed an LoI (letter of intent) with Kimitec to explore the bio-pesticides
opportunity in the country. Just like biological nutrition, there are biological control
products, which protect the plant from insects and diseases. Kimitec is a Spain-based
R&D organization, which has tied-up with various other multinational companies for
offering biological control products in developed markets and DAGRI will be their
chosen partner for the Indian market. The domestic market size of biological control,
biological nutrition, and biological stimulants is about Rs 50bn with a CAGR of c.16%
for all three categories.
Registrations received in recent CIB&RC meetings xx

Meeting No. Technicals Registration type
454 Glufosinate ammonium technical 95% 9(3) TI

454 Ipfencarbazone technical 97% 9(3) TI
454 Ipfencarbazone 25% 9(3) FIM
453 Fomesafen 12.5% + Quizalofop ethyl 4.68% 9(3) FIM
453 Tebuconazole technical 95% 9(4) TIM
453 Propiconazole technical 88% 9(4) TIM
452 Fluxametamide 5.81% + Bifenthrin 5.81% 9(3) FIM
451 Pendimethalin technical 90% 9(4) TIM
451 Lambda cyhalothrin technical 84% 9(4) TIM
449 Halosulfuron methyl 6% + Metribuzin 50% 9(3) FIM
449 Bifenthrin technical 92% 9(4) TIM
449 Glyphsoate technical 95% 9(4) TIM
449 Metribuzin technical 88% 9(4) TIM

About the company

• Agrochemical manufacturer with pan-India distribution network; 6,500
distributors and dealers, 80,000 retailers, reaching 10mn farmers' touch-points.
• Collaborations with the world's leading agrochemical companies in the US, Japan
and Europe has provided it access to the latest technologies, which it has
effectively implemented in the domestic market.
• Three manufacturing units – Sanand (Gujarat), Keshwana (Rajasthan), Udhampur
(Jammu & Kashmir).
• Establishing one plant for technical manufacturing of pesticides, i.e., backward
integration process at Dahej, Gujarat.
Dhanuka Agritech’s journey
1980 1984 1985 1986
Takes over a sick unit Northern Expands to all north India states, Incorporated as Dhanuka Pesticides Dhanuka Pesticides enters the
Minerals Pvt. Limited, Gurgaon, and Maharashtra, and Gujarat. Ltd. Sets up a plant at Sohna, capital market by offering
starts office in Daryaganj, Delhi. Inaugurates Dhanuka Agriculture Haryana, for manufacturing synthetic 600,000 equity shares.
Research Center at Delhi. pyrothrides. 1992
First global
collaboration –
2001 2000 1999 1997 tie-up with E.I.
Dupont, USA
Sets up unit at Sanand; Tie-up with Hokko Mobile seed treatment Tie-up with Sumitomo
tie up with Nissan Chemical Industry Co. technology bought from Chemical Company Ltd.
2004 Ltd, Japan Australia. Japan.
First global
collaboration –
tie-up with E.I.
Dupont, USA 2005 2008 2011 2024
Joint venture with Otsuka Agrochemical Production start Dhanuka enters into LOI with Kimitec, Spain for
Chemicals of Japan for its with Otsuka Chemicals; Dhanuka tie-up with Oro Agri, Biologicals space
pharmaceutical division. enters into a tie-up with DOW South Africa
Agrosciences, USA.

Management Profile
Name Designation Profile
Shri Ram Gopal Group Chairman Shri RG Agarwal is the Founder Chairman of Dhanuka Agritech Ltd. He holds Degree in Bachelor of Commerce (Hons) from
Agarwal Shri Ram college of Commerce, Delhi University. Shri RG Agarwal has been the past Chairman of CCFI, (Crop Care Federation
of India) the apex Chamber of all Indian Agrochemical majors. He is also Chairman Advisory Committee of AGRO Chemicals
Federation of India. He is also associated with some of the highly recognized establishments of the country as Chairman,
Sub-Committee (Crop Protection Chemicals) of Federation of Indian Chambers of Commerce and Industry (FICCI), Chairman
Advisory Committee Crop Life India & Member of Agro Chemical Federation of India.
Mr. Mahendra Vice Chairman Mr. Mahendra Kumar Dhanuka is the Vice Chairman and Managing Director of Dhanuka Agritech Ltd., he is an eminent
Kumar Dhanuka and Managing personality with vast and rich experience in the Agrochemicals Industry. He holds Degree in Bachelor of Commerce (Hons)
Directo from Shri Ram college of Commerce, Delhi University. He is also Director on the Board of Golden Overseas Pvt. Ltd.,
Dhanuka Laboratories Ltd., Dhanuka InfoTech Pvt. Ltd and M D Build tech Private Limited. He is member of various social
welfare organizations like Lions Club of New Delhi, Alaknanda, Rajasthan Ratnakar (Regd.), Investors Club & Rajasthani
Academy (Regd.). He is also Trustee of Durga Prasad Dhanuka Charitable Trust & Chiranji Lal Dhanuka.
Mr. Rahul Joint Managing Mr. Rahul Dhanuka holds a Bachelor in Chemistry and a Master’s in Business Administration from S.P. Jain Institute of
Dhanuka Director Management & Research, Mumbai, Mr. Rahul Dhanuka started his career with Dhanuka Agritech Ltd. in the year 2002. He
brought about many changes in the manufacturing and production facilities in Dhanuka production plants and then took
over the reins of Marketing function.
Mr. Harsh Executive Mr. Harsh Dhanuka has been associated with the Company since 2007, he was looking after his responsibilities as Vice
Dhanuka Director - President-Marketing and presently he is Director in the company. He holds a Degree in Bachelors of Business Administration
Alliances & (Marketing & HR) with a Master’s in Business Administration from Monash University, Melbourne, Australia. He has joined
Supply Chain the Board of Director w.e.f. 21st May, 2019.
Mr. Manish Non-Executive & Mr. Manish Dhanuka has wide-ranging experience in handling operations, commercial, marketing and finance in the
Dhanuka Non- manufacturing industry. He excels in creating economical pharmaceutical technologies and accelerated evaluation
Independent processes for improving healthcare. He has experience of 25 years in research, evaluation, and teaching in the
Director pharmaceutical industry equips him with expertise in innovative pharmaceutical technologies. He holds B.Tech in Chemical
Engineering from IIT, New Delhi, and M.S. in Chemical Engineering from the University of Akron, USA. He is on the Board of
M/s. Dhanuka Laboratories Ltd, M/s. Orchid Pharma Limited, M/s. Orchid Bio-pharma Limited, M/s. Otsuka Chemical (India)
Private Limited and M/s. Synmedic Private Limited. Before establishing M/s. Dhanuka Laboratories Ltd. in 1993, he began
his career at M/s. Ranbaxy Labs Ltd. in New Delhi and worked there for 5 years.
Mr. Vinod Kumar Chief Financial Mr. VK Bansal is a Fellow Chartered Accountant with over 30 years post qualification experience in Business Finance,
Bansal Officer Internal Auditing, Treasury Operations, Organizational Restructuring (Mergers & Acquisitions), Right Issues and Corporate
Governance. He had successfully implemented ERP twice in the organization & has been awarded with Best CFO 100 Roll of
honor award in 2015.

Financials
Income Statement Cash Flow
Y/E Mar, Rs mn FY23 FY24E FY25E FY26E Y/E Mar, Rs mn FY23 FY24E FY25E FY26E
Net sales 17,002 17,049 18,242 19,702 Pre-tax profit 3,027 3,033 3,227 3,442
Growth, % 15.1 0.3 7.0 8.0 Depreciation 176 268 298 309
Other operating income - - - - Chg in working capital (683) (42) (355) (432)
Raw material expenses 11,155 10,775 11,219 12,176 Total tax paid (692) (763) (812) (866)
Employee expenses 1,263 1,381 1,915 2,069 Cash flow from operating activities 1,828 2,496 2,358 2,452
Other Operating expenses 1,798 1,875 1,915 2,069 Capital expenditure (1,257) (269) (1,162) (1,196)
EBITDA (Core) 2,787 3,018 3,192 3,389 Chg in investments - - - -
Growth, % 5.8 8.3 5.8 6.1 Chg in marketable securities - - - -
Margin, % 16.4 17.7 17.5 17.2 Cash flow from investing activities (737) (2,728) (2,222) (2,161)
Depreciation 176 268 298 309 Free cash flow 1,115 (189) 160 315
EBIT 2,611 2,750 2,894 3,080 Equity raised/(repaid) (2) - - -
Growth, % 5.6 5.3 5.3 6.4 Debt raised/(repaid) 21 0 9 3
Margin, % 15.4 16.1 15.9 15.6 Dividend (incl. tax) (279) (275) (275) (274)
Interest paid 31 58 32 32 Cash flow from financing activities (1,073) 246 (127) (270)
Other Income 448 341 365 394 Net chg in cash 18 14 10 21
Non-recurring Items - - - -
Pre tax profit 3,027 3,033 3,227 3,442
Tax provided 692 763 812 866
Profit after tax 2,335 2,269 2,415 2,576
Valuation Ratios
Minorities/JV shares - - - - FY23 FY24E FY25E FY26E
Net Profit 2,335 2,269 2,415 2,576 Per Share data
Growth, % 11.8 (2.8) 6.4 6.7 Adj. EPS (INR) 51.2 49.8 53.0 56.5
Net Profit (adjusted) 2,335 2,269 2,415 2,576 Growth, % 14.3 (2.8) 6.4 6.7
Unadj. shares (m) 46 46 46 46 Book NAV/share (INR) 232.9 247.0 271.5 298.4
Wtd avg shares (m) 46 46 46 46 FDEPS (INR) 51.2 49.8 53.0 56.5
CEPS (INR) 55.1 55.7 59.5 63.3
CFPS (INR) - - - -
Balance Sheet DPS (INR) 6.1 5.0 5.0 5.0
Y/E Mar, Rs mn FY23 FY24E FY25E FY26E
Cash & bank 43 56 66 87 Return ratios
Marketable securities at cost - - - - Return on assets (%) 17.2 15.8 15.7 15.4
Debtors 3,390 3,400 3,638 3,929 Return on equity (%) 23.1 20.8 20.4 19.8
Inventory 3,451 3,460 3,702 3,999 Return on capital employed (%) 21.1 19.5 18.8 18.3
Loans & advances 9 9 9 10 ROIC (%) 18.1 17.5 16.8 16.3
Other current assets 2,073 2,146 2,186 2,102
Total current assets 8,966 9,071 9,602 10,126 Turnover ratios
Investments 1,589 2,040 2,104 2,104 Asset turnover (x) 5.3 5.4 4.5 4.0
Gross fixed assets 2,548 3,550 4,552 5,556 Sales/Net FA (x) 5.3 5.4 4.5 4.0
Less: Depreciation 902 1,170 1,468 1,777 Working capital/Sales (x) 2.8 2.7 2.8 2.9
Add: Capital WIP 1,532 799 959 1,151 Receivable days 66.7 72.7 70.4 70.1
Net fixed assets 3,178 3,179 4,043 4,930 Inventory days 113.3 117.1 116.5 115.4
Non - current assets 320 370 309 309 Payable days 57.3 59.0 58.3 57.9
Total assets 14,053 14,660 16,057 17,469 Working capital days 131.0 133.6 130.1 126.8
Trade Payables 1,752 1,730 1,855 2,011 Liquidity ratios

Provisions 31 31 31 31 Current ratio (x) 3.1 3.2 3.1 3.1
Total current liabilities 2,865 2,829 3,102 3,284 Quick ratio (x) 0.5 0.5 0.5 0.4
Non - current liabilities 3,312 3,274 3,556 3,742 Interest cover (x) 84.5 47.4 90.9 96.0
Total liabilities 11,188 11,832 12,956 14,185 Total debt/Equity (x) 0.0 0.0 0.0 0.0
Paid - up capital 91 91 91 91 Net debt/Equity (x) 0.0 0.0 0.0 0.0
Reserves & surplus 10,522 11,166 12,281 13,508
Minorities - - - - Valuation
Shareholders’ equity 10,613 11,258 12,372 13,599 PER (x) 18.9 19.5 18.3 17.2
Total equity & liabilities 14,053 14,660 16,057 17,469 PEG (x) yoy growth 1.3 (6.9) 2.9 2.6
Price/Book (x) 4.2 3.9 3.6 3.3
EV/Net sales (x) 2.6 2.6 2.4 2.3
EV/EBITDA (x) 16.0 14.8 14.0 13.2
EV/EBIT (x) 17.1 16.2 15.4 14.5
Source: Company, PhillipCapital India Research

Rallis India Ltd (RALI IN)

Strong domestic presence, uncertain exports outlook
18 March 2024
Strengthening its domestic business with steady product launches
Rallis’s domestic crop-protection business (CPB) includes developing, manufacturing, and
NEUTRAL
distributing agricultural inputs across India. Its distribution network across dealers and CMP RS 256
retailers is impressive, covering 80% of India's districts. Its holds c.6% market share in the TARGET RS 270 (+5%)
domestic crop protection and plant-growth nutrients segment. Under its institutional SEBI CATEGORY: SMALL CAP
business, it sells active ingredients (AIs) and bulk-formulation products. Its domestic business
has a range of generic and niche crop-protection products. Rallis’s flagship brands include COMPANY DATA
Blitox, Contaf, Takumi, Master, Panida, and Tata Metri. It aims to expand its product range by MARKET CAP (RSBN) : 50
adding key crop-protection molecules through alliances with global players like Dow MARKET CAP (USDBN) : 0.6
AgroSciences, Syngenta, and Nihon Nohyaku. 52 - WK HI/LO (RS) : 294 / 187
PAR VALUE (RS) : 1
Export position precarious due to macro concerns
Rallis’s exports have been impacted for a long time due to pricing and volume led challenges SHARE HOLDING PATTERN, %
in its pendimethalin and metribuzin (both are herbicides) portfolio. Due to this, exports CAGR Dec 23 Sep 23 Jun 23
PROMOTERS : 55.1 55.1 50.1
over FY19-24 have been sub-standard at c.4%. In recent times, China has stepped up exports DII : 13.2 14.9 13.9
of products similar to RALI’s, which has created a demand-supply mismatch. Also, due to FII : 9.2 8.2 7.7
elevated high-priced inventory in global markets, we expect RALI’s near-term exports growth OTHERS : 22.5 21.8 28.3
may continue to remain under pressure. It has been finally able to see some consistency in its
PRICE PERFORMANCE, %
custom synthesis (CSM) business where it has launched two products YTD and will add more
1MTH 3MTH 1YR
given its R&D pipeline. Additionally, PEKK (which it contract manufactures) is also showing ABS 4.1 (1.3) 32.3
signs of improvement (it was subdued in the past 2-3 years). REL TO BSE 3.7 (3.3) 6.9
Rallis offers sustainable crop solutions and new products for India farmers, and for exports PRICE VS SENSEX
Rallis’ domestic business portfolio is crafted to empower farmers through sustainable and
160
path-breaking crop-input solutions. Its field force, spread across the country, works closely
140
with farmers, supported by an extensive distribution network. It developed new products –
Daksh Plus (herbicide), Clasto (insecticide), Capstone (fungicide), and Castello (fungicide) for 120
domestic; and Anvil Plus (fungicide combination) formulation for the export market. 100
80
Seeds business needs to deliver 60
In FY23, the industry faced issues such as increased sales return and slow offtake in hybrids. Mar-21 Mar-22 Mar-23 Mar-24
RALI IN BSE Sensex
However, strong commodity prices across crops maintained the rising demand for seeds. For
RALI, reduced demand for hybrid paddy and the presence of illegal cotton led to increased
KEY FINANCIALS
sales returns in hybrid paddy and cotton in a few markets. Provision for inventory and
Rs mn FY24E FY25E FY26E
impairment of intangible assets further impacted profitability. On the positive side, it has
Net Sales 33,792 37,425 41,485
announced new launches, which can create demand and trade engagement. The
EBITDA 3,852 4,416 5,186
management has made sustainable and profitable growth a key priority and for achieving this,
Net Profit 2,821 3,408 4,125
it needs to optimise fixed costs in order to improve the bottom line. EPS, Rs 11 13 16
PER, x 23.7 19.6 16.2
Key risks: (1) El Nino to impact monsoons; 2) inventory issues to persist and impact margins; EV/EBITDA, x 13.1 11.4 9.6
3) higher returns in seeds; and 4) slow offtake in the CRAMS segment. PBV, x 2.5 2.3 2.0
ROE, % 15.1 16.2 17.7
Outlook and valuation: RALI has been working on a new launches to reduce dependence on
products such as pendimethalin, metribuzin, etc., in an effort to increase crop-care margins.
Harmish Desai, Research Analyst
It has been successful in identifying domestic suppliers for few raw materials, thus reducing
[email protected]
dependence on China to a certain extent. It has also been optimistic about performance in
CSM-led exports (started exporting new CSM products), which should be margin accretive in
the long run. However, near-term headwinds continue to impact performance, as global
uncertainty in agrochemicals is expected to persist for some time. We initiate coverage with
a Neutral rating and a target of Rs 270 (17x FY26 EPS), as we await signs of: (1) volume/price
recovery in generics, and (2) comfortable valuation.

RALLIS INDIA LTD INITIATING COVERAGE
Crop care segment

The segment consists of crop protection (93% of revenue) and crop nutrition (7%)
products. In FY23, crop care contributed 88% to total revenue, seeds 12%. In crop
protection, 40% revenues come from exports and the rest is domestic.
Cropcare segment to drive growth; near-term headwinds in exports persists

CropCare revenue EBITDA Margin
40000 15.0%
32000 14.0%
24000 13.0%
Rs mn
16000 12.0%
8000 11.0%
0 10.0%
FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E
Strong domestic pan-India portfolio – offers sustainable solutions for Indian farmers
RALI has been able to provide sustainable and innovative crop input solutions in the
domestic markets. Through its extensive distribution network, which spans 80% of
India’s districts, RALI has been able to cater to pan-India farmer requirements. It will
continue to leverage its strong presence in paddy, cotton, fruits and vegetable crops
with new launches and by scaling up its recently launched products.
Domestic business expected to pick up with timely monsoon Timely launch of new molecules key to future growth
and new launches
Crop Protection Crop Nutrition
30000
14
25000
12
20000
10
Rs mn
15000 8
10000 6
5000 4
2
0
0
FY19 FY20 FY21 FY22 FY23 YTDFY24
Ramps up R&D and launches to fill gaps in crop protection portfolio

The management is committed to launch innovative products through R&D
investments and strategic partnerships to solve the portfolio gaps in its crop
protection portfolio. Rallis's recent capacity expansion and new alliances will aid
portfolio growth. The company is planning to launch 2-3 big products in select
crops – soybean, wheat and paddy. It launched 16 products in 9MFY24 – one 9(3),
five 9(4), and few products under a co-marketing arrangement. These launches were
in addition to three new 9(3) and five new 9(4) products launched in FY23.

Exports business: New launches / partnerships create hope

Rallis expands globally with new partnerships and markets
Rallis’ production and process-development capabilities are quite significant and
complemented by international standards and strict quality parameters to meet global
requirements. It will focus on building strategic partners by exploring new geographies
for existing products and evaluating opportunities for new products. It will also focus
on developing new distribution networks in Asian and African countries to maximise
sales and product offerings. In FY23, it gained 7 registrations in overseas markets and
on-boarded new customers from Europe. It also saw significant growth in Latin
America, the Middle East, and Europe, followed by Africa. Rallis enjoys leadership
position in four of its existing products.
International business should pick up with new launches and India performance is driving growth; increase in exports to
revival in CSM aid margin expansion
14000 Asia (other than India) NA SA Africa Europe Australia
12000
9000
10000
8000 6000
Rs mn
6000
4000 3000
2000
0 0
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24EFY25EFY26E FY19 FY20 FY21 FY22 FY23
Rallis launched 13 new farm products and filed 18 patents in FY23

In FY23, RALI successfully launched 13 new products including three crop-nutrition
products. It launched 3 crop protection products under 9(3) sections viz. Daksh Plus
(wheat herbicide), Clasto (cotton white fly insecticide), Capstone (paddy blast
fungicide). Also, in crop nutrition segment it launched Rallizin (FCO), Paclo, GeoGreen
P Plus GR. RALI was also target launching new products in crops like soy, sugarcane,
maize, wheat, pulses and oil seeds. It has also filed 18 patent applications for
formulations/processes for both domestic and export markets, out of which two
patents were granted during the year.
Timely launch of new molecules is a key to future growth ITI in crop care showing good strength
Crop Protection Crop Nutrition 16%
14
12 14%
10
12%
8
6
10%
4
8%
2
0
6%
FY19 FY20 FY21 FY22 FY23 YTDFY24
FY17 FY18 FY19 FY20 FY21 FY22 FY23
Note: ITI stands for Innovation Turn Index, which indicates revenue contribution
from new molecules

Increase in R&D expenditure exemplifies need for Cropcare ITI increase shows that management is focussed on
innovation in products the CPC segment
2% Crop Protection Crop Nutrition Seeds
0.19
2%
0.17
2%
0.15
2%
0.13
2%
0.11
2% 0.09
FY19 FY20 FY21 FY22 FY23 FY21 FY22 FY23
Seeds: Faces challenges, but has strong potential for future growth
The performance of seed business typically dominates its Q1 results, with the kharif
season accounting for 60-65% of total sales. The segment was impacted in FY23 due to
reduced demand for hybrid paddy and the presence of illegal cotton, which led to
higher sales returns (products being returned by customers) in hybrid paddy and
cotton. However, strong portfolio for key crops like paddy, cotton, maize, millets and
select vegetable crops, and conventional breeding and biotechnology efforts in R&D,
should drive profitability and growth momentum should improve with competitive
product launches in the next few years.
Rallis has entered into a collaborative agreement with PlantArcBio (PAB) for developing
drought-tolerant maize. In FY23, it has launched 5 hybrid seeds viz. Paddy DR8101,
DR8375 and vegetables Revathi (Ridge gourd), Anvita (Sponge gourd) and Shambhu
(Tomato).
Seeds segment has been impacted by higher seeds return and sales of illegal seeds;
RALI focusses on introduction of hybrids going ahead
Seeds revenue EBITDA Margin
5000 15.0%
4500
10.0%
4000
3500 5.0%
3000 0.0%
Rs mn
2500
2000 -5.0%
1500 -10.0%
1000
-15.0%
500
0 -20.0%
FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E

CRAMS: New deals and rising PEKK sales

• In CRAMS, RALI contract manufactures two products – PEKK and metconazole
(Kureha Chemicals – Japan).
• RALI has signed three contracts, one of them, an intermediate, began to be
dispatched in H1.
• In Q3, it dispatched a new technical from a multipurpose plant for a Japanese
innovator, and also a new formulation.
• PEKK sales are gradually increasing, and the company's management is upbeat
about the long-term growth, anticipating its exports to increase starting H2FY24.
Management expects revival and uptick in revenue contribution from this
segment.
Vast distribution network

• 6,000+ dealers and 70,000+ retailers covering 80% districts, reaching a vast
multitude of India's farmers.
• Exports to over 58 countries.
• Sales spanning various crop segments and cultural and linguistic borders.
Dealer network Retailers

7200 120000
6000 100000
4800 80000
3600 60000
2400 40000
1200 20000
0 0
FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23
Source: Company Data Source: Company Data

Financial performance
Margins show marginal expansion, as inventory challenges Profitability ratios expected to return to previous levels post
persist FY23 and FY24
45% Gross margin % EBITDA margin % ROCE % ROE %

20
40%
35%
15
30%
25%
10
20%
15%
5
10%
5%
0% 0
RALI has historically been able to generate decent operating Working capital to remain elevated in the near term
cash flows
4000 Inventories Trade Receivables
Trade Payables Working Capital days
3000 140
120
Rs mn
100
2000
80
60
1000 40
20
0 0
About the company

• A Tata Enterprise; subsidiary of Tata Chemicals
• Business presence in the farm essentials vertical.
• One of India’s leading crop-care companies – Expanded from being a pesticide
manufacturer to a more diversified player with a relevant presence in the
agricultural value chain, with a product portfolio catering to critical agri-inputs like
soil conditioners, hybrid seeds, plant growth nutrients, and plant-protection
chemicals.
• Also has an institutional and contract-manufacturing arm that manufactures
chemicals for its institutional clients.
• 2,300 distributors reaching +40,000 retail counters across India, covering more
than 80% of the country’s districts.
• Products recognized in over 61 countries.
• Created a distinct identity with extensive R&D capabilities, delivering innovative
products.
• Acquired a majority stake in Metahelix Life Sciences Pvt Ltd (into seed
manufacturing) at an enterprise value of Rs 1.9bn in 2011 (presently holds c.80%
stake).

• Acquired a majority stake in Zero Waste Agro Organics Pvt Ltd (into organic
manure and soil conditioners manufacturing) in FY13 and holds a 51% in the
company.
• Set up Rallis Innovation Chemistry Hub (RICH) facility in Bengaluru. Rallis has
intensified its drive towards digitalization of manufacturing process, sales and
marketing.
Manufacturing locations

Management Profile
Board Designation Profile
Mr Bhat has a B Tech degree in mechanical engineering from IIT Madras and a postgraduate
Chairman and Non-Executive Non-
Mr Bhaskar Bhat diploma in management from IIM, Ahmedabad. He has extensive experience and expertise in
Independent Director
sales and marketing.
Dr C V Natraj is a PhD in chemistry and also has post-doctoral research experience in

biochemistry, with > 30 years of experience in research. He headed the research function as a
Dr C V Natraj Non-Executive Independent Director
director on the board of Hindustan Lever and later went on to lead the Corporate Research
function for Unilever as Senior Vice-President.
Ms Padmini Khare Kaicker is a chartered accountant and a certified public accountant (USA).
Ms Padmini Khare Kaicker Non-Executive Independent Director She has extensive experience in the areas of audit, taxation, corporate finance, risk
management, corporate governance, M&A, and restructuring.
Dr Punita Kumar-Sinha has a PhD, a master’s degree in finance, an MBA degree, a degree in
chemical engineering, and is also a CFA charter holder. She has 31 years of experience in fund
Dr Punita Kumar Sinha Non-Executive Independent Director
management in emerging markets, and has many years of experience in corporate
governance.
Mr R Mukundan is an engineer and MBA. During his career with the Tata Group, he has held
Non-Executive Non-Independent
Mr R Mukundan various responsibilities across the chemical, automotive and hospitality sectors. Mr
Director
Mukundan also serves as the MD & CEO on the board of Tata Chemicals.
Mr Sanjiv Lal is a chemical-engineering graduate. Mr Lal was the Chief Operating officer of the
India Chemicals Business of Tata Chemicals. He has handled its agri retail business, headed
Mr Sanjiv Lal MD and CEO the organizational transformation, business excellence function, and information technology
function. Before joining Tata Chemicals, Mr Lal had worked with Hindustan Unilever for 21
years in various functions.

Financials
Growth, % 13.9 13.9 10.8 10.8 Depreciation 914 1,045 1,102 1,167
Other operating income - - - - Chg in working capital 135 (2,141) (2,352) (2,876)
Raw material expenses 19,433 20,613 23,204 25,928 Total tax paid (361) (710) (858) (1,038)
Other Operating expenses 5,496 6,116 6,362 6,638 Capital expenditure (1,548) (509) (545) (583)
Growth, % (20.4) 76.4 14.6 17.4 Chg in marketable securities - - - -
Margin, % 7.4 11.4 11.8 12.5 Cash flow from investing activities (2,004) (509) (545) (583)
Depreciation 914 1,045 1,102 1,167 Free cash flow 51 668 886 938
EBIT 1,270 2,808 3,314 4,018 Equity raised/(repaid) - - - -
Growth, % (36.5) 121.1 18.0 21.2 Debt raised/(repaid) 458 (641) 38 41
Margin, % 4.3 8.3 8.9 9.7 Dividend (incl. tax) (486) (486) (486) (486)
Interest paid 122 163 130 143 Cash flow from financing activities (135) (1,127) (448) (445)
Other Income 127 176 225 249 Net chg in cash (172) (622) 307 350
Non-recurring Items - - - -
Pre tax profit 1,274 2,821 3,408 4,125
Tax provided 361 - - -
Profit after tax 913 2,821 3,408 4,125
Valuation Ratios
Net Profit 913 2,821 3,408 4,125 Per Share data
Growth, % (44.4) 208.9 20.8 21.0 Adj. EPS (INR) 4.7 10.9 13.1 15.9
Net Profit (adjusted) 915 2,111 2,551 3,086 Growth, % (44.3) 130.7 20.8 21.0
Unadj. shares (m) 194 194 194 194 Book NAV/share (INR) 89.0 102.7 113.3 126.7
CEPS (INR) 9.4 16.2 18.8 21.9
CFPS (INR) - - - -
Cash & bank 460 (162) 145 495 Return ratios
Loans & advances - - - - ROIC (%) 5.0 13.4 14.6 16.1
Investments 33 33 33 33 Asset turnover (x) 4.2 5.1 6.2 7.6
Less: Depreciation (3,563) (4,607) (5,709) (6,876) Working capital/Sales (x) 4.1 3.5 3.0 2.7
Add: Capital WIP 1,794 1,794 1,794 1,794 Receivable days 58.1 54.4 56.3 63.4
Non - current assets 2,640 2,640 2,640 2,640 Payable days 125.9 117.1 121.5 113.0

Provisions 489 618 639 661 Current ratio (x) 1.8 1.8 1.9 2.2
Paid - up capital 194 194 194 194 Net debt/Equity (x) 0.0 0.0 0.0 0.0
Total equity & liabilities 27,977 32,543 35,812 38,754 PEG (x) yoy growth (1.2) 0.2 0.9 0.8
Price/Book (x) 2.9 2.5 2.3 2.0
EV/Net sales (x) 1.7 1.5 1.3 1.2
EV/EBITDA (x) 23.2 13.1 11.4 9.6
EV/EBIT (x) 39.8 18.0 15.2 12.4

Bayer CropScience Ltd (BYRCS IN)

Decent financial metrics; maize portfolio to be key
18 March 2024
Strong corn portfolio provides additional steam for growth: The management is focused on
introducing maize hybrids to increase yields, which will help India to reduce imports, and
NEUTRAL
benefit Indian farmers as they earn good prices. As BYRCS has been breeding maize globally, CMP RS 5,086
its seed quality is good, because of which it already has a strong position in agri commodities TARGET RS 5,435 (+7%)
in India. It will also keep launching new hybrids to keep its portfolio fresh; ‘Dekalb’ maize SEBI CATEGORY: MID CAP
hybrid seeds is its top-selling product. Strong performance in its maize hybrids business in
FY23 and H1 FY24 has resulted in higher margins (FY23 gross margin up 150bps yoy). Recently, COMPANY DATA
India drew up plans to divert more maize to make ethanol for the country's fuel-blending MARKET CAP (RSBN) : 229
program and ramp up output by nearly 10 times in five years. Due to this, the government MARKET CAP (USDBN) : 2.8
will push production of maize, which is incidentally quite profitable for farmers because it 52 - WK HI/LO (RS) : 6,202 / 3,920
needs less water. For the merged entity, maize and rice are two major crops. We believe that PAR VALUE (RS) : 10
remunerative maize prices in the domestic market (up 17% yoy in November 2023) should
support growth in the near/medium term. SHARE HOLDING PATTERN, %
Dec 23 Sep 23 Jun 23
New products and initiatives help increase farmer connect: In an effort to increase protein PROMOTERS : 71.4 71.4 71.4
availability, lessen labour pressures, and improve access to nutrient-dense food, BYRCS’ DII : 12.7 13.2 13.1
FII : 3.5 3.3 3.2
‘transform’ programs are merging with a growing go-to-market strategy. The business sees OTHERS : 12.3 12.0 12.3
sustainable farmers produce organisations (FPO) as expansion of their farming strategy and
supports the government's efforts to increase the number of such organisations. The PRICE PERFORMANCE, %
company helps farmers by offering commercial drone services. It is using digital tools to 1MTH 3MTH 1YR
connect with farmers, increase brand awareness, share knowledge, and foster trust. It ABS (13.1) (6.4) 27.5
REL TO BSE (13.5) (8.5) 2.1
contends that dry direct seeding of rice offers advantages over conventional transplanting
and flooding, including reduced methane emissions, water conservation, and the creation of PRICE VS SENSEX
carbon credits. Such initiatives help the company to increase farmer-connects across the
country. BYRCS will launch several innovative products from its parent over the next few years 150
(launched 25 over FY15-24), which will support growth. It registered 3 products in FY23-24. 130
Innovative products to deliver strong margins: The company's top-five products, including 110
Dekalb, RoundUp, Nativo, Laudis, and Council Activ, represent c.44% of its total domestic 90
sales. Glyphosate prices have corrected recently (against expectations) but come back quicker
70
than expected and the availability of the product will compensate for the loss of price. Mar-21 Mar-22 Mar-23 Mar-24
Glyphosate will continue to grow primarily due to labour shortage in the country. The BYRCS IN BSE Sensex
company has very less amount of channel inventory and is ready for the upcoming kharif
season. Corn is profitable for farmers and will become increasingly important in India due to KEY FINANCIALS
rising incomes, a need for more animal fodder, and the potential for fuel ethanol. Rs mn FY24E FY25E FY26E
Net Sales 55,509 61,060 67,166
Strong balance sheet with attractive financial metrics: Over the years, BYRCS has delivered EBITDA 12,045 12,823 14,105
strong financial performance with steady operating cash flow, robust balance sheet, strong Net Profit 8,755 9,483 10,429
dividend payout, strong liquidity, and strong gearing due to zero debt. Due to seasonality in EPS, Rs 195 211 232
the kharif season, working capital tends to be higher in the first half of the fiscal, but PER, x 26.0 24.0 21.9
normalizes by the end of the year. Also, it is seen that cash accruals are adequate to meet EV/EBITDA, x 18.2 17.0 15.4
funding requirements, reducing stress on the balance sheet. PBV, x 6.6 5.3 4.4
ROE, % 28.4 24.6 22.1
Valuation: BYRCS has a vast crop-protection portfolio comprising innovative chemicals and
biological pest-management solutions. It also develops seeds and traits that provide farmers Harmish Desai, Research Analyst
with new solutions. Through its vast dealer network (c.80,000) in the country, it provides [email protected]
extensive customer service for modern and sustainable agriculture. BYRCS will be focussing
on maize hybrids going ahead. The company is amongst the leading players in India, but the
current scenario casts a net of uncertainty on its near-term future. We remain optimistic on
the long-term prospects of the company, however, near term scenario presents few
challenges. We initiate coverage with a Neutral rating at a target of Rs 5,435, 23x FY26 EPS.

BAYER CROPSCIENCE LTD INITIATING COVERAGE
Financial Performance:
BYRCS revenue CAGR of c.10% from FY24-26 BYRCS to deliver decent margins due to introduction of new
molecules
70000 EBITDA EBITDA Margin (%)
15000 22.0
60000
12500
50000 20.0
10000
40000
Rs mn
Rs mn
7500 18.0
30000
5000
20000
16.0
10000 2500
0 0 14.0
Source: Company Data, PhillipCapital India Research Source: Company Data, PhillipCapital India Research
Business has been generating decent ratios consistently BYRCS has been generating strong cash flows over the years
RoCE (%) RoE (%) OCF
40 8000
6000
30
Rs mn
4000
20
2000
10 0
Source: Company Data, PhillipCapital India Research Source: Company Data, PhillipCapital India Research

Company profile
• Bayer CropScience Ltd’s Agri Care business – includes manufacture, sale and
distribution of insecticides, fungicides, herbicide and various other agrochemical
products and production, sale and distribution of hybrid corn seeds.
• Its geographical segments are India, Germany, Bangladesh, and Others, of which
the vast majority of its revenue comes from India.
• The company is a subsidiary of Bayer AG (Germany), with the majority of common
shares owned by its parent company and other Bayer AG subsidiaries.
• It is also involved in sale and distribution of other row-crop hybrid seeds.
• The company has manufacturing facility for agrochemical production at
Himatnagar and Silvassa with seed drying and processing station at Hyderabad,
and breeding stations at Bengaluru and Udaipur.
Over the years
1896 1958 1990 1996
First wholly owned subsidiary of First facility for formulation of Bayer Set up of a production unit at Vapi Set up of a maize conditioning
Bayer in Asia “Farbenfabriken Bayer Pesticides begins in Bombay at a (earlier called Mitsu by the Bilakhia plant at Shameerpet,
and Co. Ltd.” is set-up in Mumbai. small plant acquired by Bayer’s Group) for the manufacture of Hyderabad; set up of an
partner intermediates and agrochemicals, agrochemical manufacturing
which is today known as Bayer Vapi site at Silvassa
2016 2015 2013 2004
A corn breeding centre Bayer inaugurates a new Global The seeds business unit opens a First Imidacloprid production
is set up in Udaipur, Formulation Technology multi-crop breeding station in facility outside Germany is
2017 Rajasthan Laboratory at its manufacturing Chandippa, Hyderabad, and a inaugurated in Vapi
site in Vapi, Gujarat, India mustard breeding station in
Set up of a Palwal, Haryana.
production site at
Deulgaon Raja,
Maharashtra for 2018 2019 2019
high quality seeds
for export
Globally, Bayer closes Monsanto Monsanto integration Bayer launches consumer

acquisition and concludes completed, new plant is health division in India.
process to sell Covestro. inaugurated at Bayer‘s Bayer completes 125 years
Himatnagar, Gujarat. in India
Management Profile
Name Designation Profile
Pankaj Patel was appointed as an Independent Director with effect from September 12, 2016 for a
Chairman & Non-Executive
Pankaj Patel term of five years. At the 63rd AGM, he was re-appointed as an Independent Director for a second
Independent Director
term of five year with effect from September 12, 2021.
Simon started his career with Bayer in 1998 based at the company’s headquarters in Germany. He
President of Bayer South Asia and Vice holds a Bachelor’s degree in Economics from the University of Applied Sciences in Essen, Germany,
Simon Wiebusch Chairman, MD & CEO of Bayer and an MBA from the University of Bradford. Simon was appointed as an Additional Director with
CropScience Ltd (BCSL) effect from December 17, 2021. He was also appointed as the Whole Time Director of the
Company with effect from December 17, 2021.
Simon Britsch started his career with Bayer AG as a Commercial Trainee in the year 2000. He is an
Chief Financial Officer for Bayer South
alumnus of Harvard Business School. Simon was appointed as an Additional Director with effect
Simon Britsch Asia, Whole-Time Director for Bayer
from September 1, 2021. He was also appointed as the Whole Time Director and Chief Financial
CropScience Limited
Officer of the Company with effect from September 1, 2021 for a term of five years.
Sekhar is a qualified Chartered Accountant and Cost Accountant. He was appointed as an
Sekhar NatarajanNon-Executive Independent Director Additional Director with effect from October 1, 2019. He was appointed as a Non-Executive
Independent Director with effect from August 7, 2020 for a term of five years.

Financials
__________ Sales __________ __________ EBITDA __________ __________ PAT __________ ____EBITDA Margin (%)_____
Companies
FY24E FY25E FY26E FY24E FY25E FY26E FY24E FY25E FY26E FY24E FY25E FY26E
UPLL 418,089 532,467 559,935 53,933 101,169 111,987 1,592 34,228 42,969 12.9 19 20
PI 79,935 96,958 112,501 20,383 25,694 28,125 16,403 20,999 22,879 25.5 26.5 25
DAGRI 17,049 18,242 19,702 3,018 3,192 3,389 2,269 2,415 2,576 17.7 17.5 17.2
RALI 33,792 37,425 41,485 3,852 4,416 5,186 2,111 2,551 3,086 11.4 11.8 12.5
BYRCS 55,509 61,060 67,166 12,045 12,823 14,105 8,755 9,483 10,429 21.7 21.0 21.0
SHCR* 35,167 40,247 46,354 3,440 5,878 7,879 770 2,040 3,266 9.8 14.6 17.0
SUMICHEM* 28,578 34,406 39,943 4,490 6,322 7,674 3,491 4,927 6,029 15.7 18.4 19.2
Source: PhillipCapital India Research, Company Data, *Bloomberg data

Financials
Growth, % 8.6 8.0 10.0 10.0 Depreciation 795 811 875 963
Other operating income - - - - Chg in working capital (834) (7,285) (6,496) (8,384)
Raw material expenses 28,160 31,085 33,583 36,941 Total tax paid (2,319) (2,945) (3,190) (3,508)
Other Operating expenses 8,652 8,215 9,159 10,075 Capital expenditure (619) (572) (697) (822)
Growth, % 13.9 30.3 6.5 10.0 Chg in marketable securities - - - -
Margin, % 18.0 21.7 21.0 21.0 Cash flow from investing activities (5,241) (572) (697) (822)
Depreciation 795 811 875 963 Free cash flow 2,473 1,860 3,308 2,345
EBIT 8,447 11,234 11,948 13,142 Equity raised/(repaid) - - - -
Growth, % 13.1 33.0 6.4 10.0 Debt raised/(repaid) (154) - - -
Margin, % 16.4 20.2 19.6 19.6 Dividend (incl. tax) (1,363) (1,361) (1,361) (1,361)
Interest paid 223 200 191 213 Cash flow from financing activities (1,496) (1,361) (1,361) (1,361)
Other Income 639 666 916 1,007 Net chg in cash 806 349 1,804 825
Non-recurring Items 1,038 - - -
Pre tax profit 9,901 11,700 12,673 13,937
Tax provided 2,319 2,945 3,190 3,508
Profit after tax 7,582 8,755 9,483 10,429
Valuation Ratios
Net Profit 7,582 8,755 9,483 10,429 Per Share data
Growth, % 17.5 15.5 8.3 10.0 Adj. EPS (INR) 151.2 195.0 211.2 232.3
Net Profit (adjusted) 6,787 8,755 9,483 10,429 Growth, % 13.0 29.0 8.3 10.0
Unadj. shares (m) 45 45 45 45 Book NAV/share (INR) 604.0 768.7 949.6 1,151.5
CEPS (INR) 168.9 213.1 230.7 253.7
CFPS (INR) - - - -
Cash & bank 8,680 9,029 10,833 11,658 Return ratios
Loans & advances - - - - ROIC (%) 34.3 32.5 27.8 24.3
Investments 256 256 256 256 Asset turnover (x) 11.7 12.7 14.0 15.4
Less: Depreciation 3,275 4,086 4,961 5,924 Working capital/Sales (x) 2.6 2.0 1.7 1.5
Add: Capital WIP 29 29 29 29 Receivable days 70.3 72.1 86.4 105.5
Non - current assets 2,106 2,106 2,106 2,106 Payable days 109.7 93.2 92.7 92.1

Provisions 2,653 2,595 2,712 2,977 Current ratio (x) 2.0 2.6 2.7 3.1
Paid - up capital 449 449 449 449 Net debt/Equity (x) (0.3) (0.3) (0.2) (0.2)
Total equity & liabilities 46,786 52,152 63,983 73,249 PEG (x) yoy growth 2.6 0.9 2.9 2.2
Price/Book (x) 8.4 6.6 5.3 4.4
EV/Net sales (x) 4.3 4.0 3.6 3.2
EV/EBITDA (x) 23.8 18.2 17.0 15.4
EV/EBIT (x) 26.0 19.5 18.2 16.5

Rating Methodology
We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year.
We have different threshold for large market capitalisation stock and Mid/small market capitalisation stock.
The categorisation of stock based on market capitalisation is as per the SEBI requirement.
Large cap stocks

Rating Criteria Definition
BUY >= +10% Target price is equal to or more than 10% of current market price
NEUTRAL -10% > to < +10% Target price is less than +10% but more than -10%
SELL <= -10% Target price is less than or equal to -10%.
Mid cap and Small cap stocks

Rating Criteria Definition
BUY >= +15% Target price is equal to or more than 15% of current market price
NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%
SELL <= -15% Target price is less than or equal to -15%.
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INSTITUTIONAL EQUITY RESEARCH

to manufacturers for better performance in FY25. In this report, we focus on crop-protection

Page | 1 | PHILLIPCAPITAL INDIA RESEARCH

Dhanuka Agritech Ltd ..................................................................................... 33

Page | 2 | PHILLIPCAPITAL INDIA RESEARCH

Agrochemicals landscape India/international

Off-patent molecules drive affordable crop protection

Opportunities for India: Growth via exports, innovation and biopesticides

Page | 3 | PHILLIPCAPITAL INDIA RESEARCH

Challenges amid growth potential: Competition, regulations, fluctuating prices, and

Bayer Cropscience: BYRCS has a vast crop-protection portfolio comprising innovative

Page | 4 | PHILLIPCAPITAL INDIA RESEARCH

Global agchem industry CAGR at 4.2% over 2024-32

In 2022, the global crop-protection sector witnessed a number of extraordinary events

Crop protection market 2016-2022

Crop-wise growth of agrochemical market: Soybeans and cotton fastest growing

Category-wise growth in global markets: Herbicides lead in share and growth

Page | 5 | PHILLIPCAPITAL INDIA RESEARCH

Some of the benefits of agrochemicals are:

Herbicide market trends: Glyphosate, glufosinate, South America dominate

Page | 6 | PHILLIPCAPITAL INDIA RESEARCH

India agchem manufacturers to prop global demand

SWOT analysis of the Indian agrochemicals industry

STRENGTHS WEAKNESS OPPORTUNITY THREATS

Source: Company Data, PhillipCapital India Research

Indian agrochemicals industry India: Segment-wise share of agrochemicals in 2023

Source: PhillipCapital India Research Source: PhillipCapital India Research

Page | 7 | PHILLIPCAPITAL INDIA RESEARCH

India: Top-5 agrochemicals consuming states India: Top-5 agrochemicals manufactured

Source: PhillipCapital India Research Source: PhillipCapital India Research

India became 2nd largest exporter of agrochemicals globally in 2022

Top-5 agrochemicals exports countries (2022)

India tops post-patent agrochem exports, PLI to boost domestic production

Trade surplus over the years

Page | 8 | PHILLIPCAPITAL INDIA RESEARCH

India’s agrochemical exports: Performance attributed to technical capability –

Investments in agrochemicals to support growing demand

Indian manufacturers invest in R&D and partnerships for innovation

Nowadays, to bolster R&D activities, manufacturers are going on a hiring spree to

Domestic manufacturers increase investments in R&D to trigger growth

Page | 9 | PHILLIPCAPITAL INDIA RESEARCH

International manufacturers exploring India opportunity through JVs

Indian manufacturers focusing on backward integration

Some of the benefits of backward integration:

Strong distribution network helps promote agrochemicals products among farmers

Dealer network of agrochemicals companies

UPL Ltd 25,000+

Page | 10 | PHILLIPCAPITAL INDIA RESEARCH

Opportunities for India in agrochemicals

Some observations about the off-patent market

#2: Agrochemical consumption per hectare is very low in India

Page | 11 | PHILLIPCAPITAL INDIA RESEARCH

Source: PhillipCapital India Research, FAO

India low pesticide use (230gm/ha) makes it a net exporter

Source: PhillipCapital India Research Source: PhillipCapital India Research

Page | 12 | PHILLIPCAPITAL INDIA RESEARCH

Source: PhillipCapital India Research

Source: PhillipCapital India Research

Page | 13 | PHILLIPCAPITAL INDIA RESEARCH